Wall Street is betting that robust corporate profits will help support stock prices even as the Iran conflict has driven oil sharply higher and revived inflation concerns. Since the escalation of the conflict in late February, the S&P 500 has declined almost 4% while crude oil has climbed by more than 30%.
Marketwide earnings expectations for the first quarter have largely held up amid the turmoil. Data from LSEG put expected first-quarter earnings growth for the S&P 500 at 14%. That figure compares with 14.4% at the start of the year and with an earlier estimate of 12.4% from October 1.
Investors and portfolio managers say companies have shown increasing capacity to absorb geopolitical shocks, especially among U.S. firms. "So much is happening, yet nothing is happening. ... Companies inherently are becoming more resilient to geopolitical risks, particularly U.S. companies," said Krishna Chintalapalli, a portfolio manager at Parnassus Investments in San Francisco.
Traders have pushed crude prices higher after the conflict reduced flows through the Strait of Hormuz, amplifying worries about inflation and weakening hopes for monetary easing. JP Morgan has estimated that each sustained 10% rise in oil prices could subtract 15 to 20 basis points from gross domestic product. The bank also noted that if oil stays around $110 per barrel for the rest of 2026, consensus earnings-per-share estimates could be revised down by 2% to 5% or possibly more should prices climb further.
Oil markets opened the week with U.S. futures trading near $91 a barrel and the global Brent benchmark close to $103. Higher energy and commodity prices, including for products tied to oil such as fertilizer, have prompted concerns that inflation will reaccelerate, consumers will retrench and the Federal Reserve will be less inclined to cut interest rates in the near term.
Even so, analysts say corporate profit expectations appear resilient. Chintalapalli noted that discussions with company managements across sectors - from firms benefiting from AI-driven demand to consumer-oriented businesses like Walmart and industrial operators such as FedEx - suggest executives largely accept a baseline of persistent uncertainty as part of the operating environment.
LSEG tracking through Friday showed that among 120 company-issued earnings previews or forecasts for the first quarter from S&P 500 firms, 48% were positive relative to analysts' estimates while 44% were negative. That mix indicates a degree of dispersion in near-term results but does not point to a broad-based earnings collapse.
Lori Calvasina, head of U.S. Equity Strategy at RBC Capital Markets, reviewed company commentary and reported that many management teams described the situation as early and too soon to quantify the full effects. She added that the range of outlook statements suggested firms had reasonable grounds for staying calm. According to her reading, the more pronounced downside risk to corporate earnings may be concentrated in the second half of the year rather than in the immediate quarter.
Airlines, which are among the most exposed to rising fuel costs and to possible reductions in discretionary consumer spending, have offered some reassurance. United Airlines and Delta Air Lines announced that demand remained firm, giving them scope to increase fares even as higher fuel prices forced route cuts. Those reports helped to temper anxiety ahead of earnings season.
Market strategists have highlighted how companies often manage expectations to set up reporting outcomes. "Companies in general play the earnings expectations game pretty well because they want to be able to announce a beat in most cases," said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Southfield, Michigan. He added that it would not be surprising to see some firms lower expectations modestly to reduce the potential for market disappointment and to smooth the path to a positive surprise when results are reported.
From a valuation and macro perspective, Morgan Stanley's Mike Wilson observed that forward earnings growth remains intact and that the 12-month forward price-to-earnings ratio for the S&P 500 has fallen about 15% from October highs. Wilson argued that the combination of continued earnings strength and lower valuation supports the view that the recent oil spike is unlikely to precipitate an end to the business cycle.
Barclays' U.S. equity strategy chief Venu Krishna took a similarly constructive position by raising the firm's 2026 S&P 500 price target to 7,650 from 7,400. That move reflected a view that solid corporate earnings, particularly led by the technology sector, together with resilient economic growth, can offset elevated macro risks, including the Middle East conflict, AI-driven disruption and strains in private credit markets.
Still, optimism about near-term earnings is predicated on the conflict not becoming prolonged. Michael Arone, chief investment strategist at State Street Investment Management in Boston, said investors appear to be pricing in a relatively short episode - "measured in weeks, maybe a couple months" - rather than a drawn-out confrontation. Arone noted that this assessment helps to explain why the current quarter's results have not been widely downgraded, but he emphasized that what companies say about their outlook in coming weeks - given the conflict's progression into mid-April - will be important for determining market direction.
For some market participants, the central question is whether the combination of firm demand reports, manageable near-term company commentary and lower forward valuations will be enough to offset the economic drag that sustained higher oil would impose. JP Morgan's analysis underscores that prolonged commodity pressure remains a tangible downside risk to growth and consensus profit expectations, even if immediate earnings forecasts have remained resilient.
Finally, the article's broader context includes reference to analytical tools that evaluate individual stocks. One such tool mentioned in the original coverage is an AI-driven stock-selection service that profiles specific equities, including the Delta Air Lines ticker DAL, across numerous financial metrics to assess current opportunities. That material highlights how investors and services continue to scrutinize airline exposure and other sector-level sensitivities as they interpret company guidance and macro signals heading into the earnings reporting season.
Lengthy outlook in focus: As the second quarter approaches, market attention is likely to shift from near-term resilience to the degree to which higher energy prices influence consumer behavior, corporate margins and central bank policy over the coming quarters.