JPMorgan Chase points out two major misconceptions in the market: energy independence cannot save the United States, and the market is overly optimistic about the easing of tensions.

BlockBeats message, April 7, Morgan Asset Management Chairman Michael Cembalest released a new report describing how the U.S.-Iran Gulf conflict has evolved from “clearing evil” to a situation where everyone is harmed. The report points out that investors have two major misjudgments about Iran’s situation.

First, the market has misjudged that America’s energy independence (as a net exporter) could become a “firewall” against a Strait blockade or oil price shocks. But that is not the case—U.S. fossil fuels still account for 85% of final energy consumption. As global oil prices rise, U.S. domestic prices for crude oil, gasoline, jet fuel, and other products would be directly pushed up with a transmission rate exceeding 100%, and price increases for various hydrocarbon compounds other than natural gas are even higher than those in Europe and Asia.

Second, the market has underestimated the costs and effectiveness of Iran’s strategy of “holding the global economy hostage,” and has been overly optimistic about expectations for easing tensions. Iran has found that controlling the Strait is cheaper and more effective than expected, so there is no pressure to back down quickly.

In the report, Cembalest emphasizes that rapidly shifting to renewable energy to reduce reliance on fossil fuels, at the current pace, requires 10-15 years, which is a “frenzied fantasy.” Overall, this conflict has exposed the limitations of the United States’ military and energy strategy, with no clear winner. Cembalest also reminds investors to watch out for systemic risk.