Investing.com -- Global equities have retreated since the start of the U.S.–Iran war, but UBS has maintained its “Attractive” stance on the asset class despite heightened energy risks.

In a note headed by strategist Fabian Deriaz, UBS told investors that “left-tail risks are elevated should disruptions to energy flows persist,” noting that the Strait of Hormuz is essentially closed.

Still, the firm expects de-escalation “within the next few weeks” and maintains that the broader investment backdrop remains constructive.

According to UBS, geopolitical shocks are “on average, quickly bought,” though the bank stressed that diversification and risk management are critical until energy flows normalize.

UBS believes the macro environment continues to offer support, citing “easing tariff headwinds, anticipated Fed rate cuts, and supportive fiscal policies.”

It expects 12% earnings growth for the MSCI AC World Index this year and sees earnings broadening through 2026.

UBS said sustained higher oil prices could weigh on growth, inflation, and central bank policy, but argued that a prolonged conflict is unlikely due to the “high political costs for the US to prolong the conflict.”

If tensions cool, UBS expects the damage to equities “to be contained” and sees key markets, including the U.S., Eurozone, Japan, and emerging markets, continuing to perform.

Once volatility subsides, UBS expects investors to refocus on medium-term drivers such as a “cyclical recovery” and developments in AI and U.S. tech.

The bank continues to recommend diversified exposure to structural themes, including AI, power and resources, and longevity, while taking a more selective approach within the AI sector.

UBS’s base case remains that “the growth outlook is supportive,” reiterating its bullish stance on global equities.