Bank of America warns that the market may be underestimating the risks of a war triggered by Iran.

Antonio Gabriel, global economist at Bank of America Securities, said that investors may be underestimating the potential for global economic turmoil sparked by the Iran conflict. "While there is a possibility for the conflict to be resolved quickly, we believe there is also a significant likelihood of the conflict extending into the second quarter, and the possibility of a prolonged war cannot be ruled out," Gabriel wrote in a report on Monday. "However, the market seems to view this as largely a temporary shock." The S&P 500 index has only dropped about 4% from its record high, leading Gabriel to believe that investors are relatively optimistic about the war - even though inflation concerns have prompted traders to lower their bets on the extent of interest rate cuts by the Federal Reserve this year. Gabriel wrote, "We believe that the market is primarily focused on inflation, and the potentially disruptive scenario for global growth may be underestimated."