Investing.com -- A potential diplomatic breakthrough between the U.S. and Iran could unlock a significant shift in sector leadership, according to a note from Wolfe Research on Tuesday.

Analyst Chris Senyek highlighted that while the administration’s messaging on the conflict has been inconsistent. President Donald Trump’s decision to walk back comments on striking Iranian energy infrastructure sent stocks higher Monday as oil prices fell sharply.

Senyek says Wolfe Research is “looking for further progress to be made on Iran to dial up risk exposures,” arguing that a sustained resolution “would clear a path higher for equities.”

In such a scenario, Wolfe Research recommends buying semiconductors, industrials and equal-weighted discretionary stocks.

According to the note, if the administration does strike a deal, investors are likely to “once again buy companies most leveraged to the AI trade (Semis, Hardware, etc.).”

Senyek expects mega-cap technology stocks to attract strong inflows, citing a combination of robust growth and “increasingly attractive valuations.”

Wolfe Research also highlights likely shifts in global capital flows. While a resolution would support global growth, the firm says international markets may struggle given their greater sensitivity to oil prices.

Senyek writes that foreign investors would “rotate back into the U.S. and more specifically, Nasdaq/large caps,” as easing geopolitical risks refocus attention on high-growth U.S. technology names.