Wall Street banks are expected to report trading revenues exceeding $40 billion in the first quarter of this year, amidst rising unrest in the Middle East stemming from the Iranian conflict, which has led to notable fluctuations in financial markets.
According to a report published by the (Financial Times), banks such as JPMorgan Chase, Goldman Sachs, Morgan Stanley, Citi Group, and Bank of America are anticipated to disclose their highest combined quarterly trading revenues in over 12 years, based on forecasts compiled by Bloomberg.
Details of the Event
This figure represents an increase of approximately 13% compared to the first quarter of last year, despite the unusual volatility experienced at the beginning of 2025 due to the trade wars initiated by former President Donald Trump.
Analysts noted that the rise in volatility was a result of the Russian-Ukrainian crisis in the first quarter of 2022, and a similar situation is expected to recur in the first quarter of this year due to military actions in the Middle East.
Background & Context
The conflict in the Middle East has led to a record rise in oil prices, adversely affecting stock markets, as concerns grow that high energy prices could trigger a global inflation wave that might push some economies towards recession.
Despite sharp movements in oil prices, analysts expect stock trading growth to outperform trading in fixed income, currencies, and commodities. Banks are projected to see growth ranging between 13% and 15% in stock trading, and between 8% and 13% in fixed income, currencies, and commodities, with JPMorgan and Citi Group expected to record the largest gains.
Impact & Consequences
Investment banks were forced to restructure their trading operations following the financial crisis of 2008, becoming less reliant on direct bets on market trends and more focused on facilitating and financing deals for clients.
Investment banking fees are expected to continue rising during this quarter, with projections of increases exceeding 10% across all five banks. Additionally, deal-making activities have seen a resurgence in recent months after years of stagnation, driven by demand for financing AI projects and a more flexible regulatory environment.
Regional Significance
Despite the escalating geopolitical uncertainty during the quarter, banks will still earn fees from deals announced last year that were completed in the first three months of this year. Overall, bank profits are expected to rise by about 7%, with the largest gains anticipated at Goldman Sachs and Morgan Stanley, due to their heavy reliance on trading and investment banking activities.
However, analysts warned that investment banking fees could be adversely affected if the conflict in the Middle East persists, and stock market volatility might dampen investor appetite for initial public offerings. They indicated that if there is a weak aspect during this quarter due to increased volatility, it could be in the capital markets activity for stocks.
Goldman Sachs is set to kick off the earnings season tomorrow, followed by JPMorgan and Citi on Tuesday, and then Morgan Stanley and Bank of America on Wednesday. Investors are closely monitoring the banks' exposure to non-bank lenders amid a wave of redemptions in private credit funds due to concerns about credit quality.