UBS lowers 2026 S&P 500 target on Middle East conflict risks

April 7 - UBS Global ‌Wealth Management trimmed its ​S&P ​500 index target for 2026, pointing to sustained higher oil prices amid the ongoing Middle East conflict that could pressure U.S. ‌economic growth and inflation.

In a note dated April 6, the ⁠brokerage cut its year-end target to 7,500 from 7,700 and trimmed its mid-year target ‌to 7,000 from 7,300.

The benchmark ‌index has fallen about 3.9% since the Iran war began on February 28, as soaring oil prices and geopolitical risks prompted investors to pull ​back from equities.

In its base case, UBS expects the Middle East conflict to wind down over the coming weeks, which would allow ⁠the gradual resumption of energy flows.

But restoring oil production to pre-conflict levels will take longer, UBS said, ​given the widespread infrastructure damage and the time required to bring back full capacity, which could keep oil prices ​elevated.

"Higher energy prices are likely to modestly ‌weigh on economic growth and keep inflation pressures firmer at the margin. In turn, this will likely delay the ⁠timing of additional Federal Reserve rate cuts," UBS said.

Last month, the brokerage also pushed back its Fed rate‑cut expectations, now forecasting two 25‑basis‑point cuts in September and ⁠December, compared to its expectation of the cuts in June and September.

Despite the index ​target reduction, the current forecast implies a 13.43% upside to the S&P's last close of 6611.83.

UBS reiterated an "attractive" view on U.S. equities and kept its 2026 S&P 500 ‌earnings forecast unchanged at $310 per share.

"As the negative effects of the war begin to fade, we expect stocks to ‌be buoyed by a combination of still solid profit growth, a Fed that ⁠remains broadly supportive even if ‌policy easing is delayed, ​and the continued adoption and monetization of AI," UBS added.

(Reporting by Kanishka Ajmera in Bengaluru; Editing by Nivedita Bhattacharjee and ‌Shinjini Ganguli)

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