UBS cuts S&P 500 2026 targets amid rising oil prices

UBS Global Wealth Management reduced its 2026 S&P 500 target on Monday, citing elevated energy costs stemming from the ongoing conflict in the Middle East.

The analysts expect the conflict to weigh on US economic growth and inflation.

In its report dated April 6, 2026, UBS cut its year-end S&P 500 target to 7,500 from 7,700 and lowered its mid-year target to 7,000 from 7,250.

Middle East tensions and energy prices

UBS, in its base case, noted that while hostilities are expected to subside within a few weeks, the conflict has already led to a sharp increase in oil prices.

The bank described the situation as a temporary disruption but warned of "considerable risk" in the energy sector due to damaged infrastructure, which is likely to keep crude prices elevated in the near term.

The surge in oil costs has implications for US monetary policy.

UBS strategists said higher energy prices will slightly weigh on growth and delay further Federal Reserve interest rate cuts, keeping rates above zero and exerting modest inflationary pressure.

The bank forecasts two 25-basis-point interest rate cuts, with the first expected in September and the second in December.

Market impact and UBS outlook

Since the Iran conflict began on February 28, the S&P 500 has declined approximately 3.9% as investors reacted to rising geopolitical and energy risks.

Despite the short-term volatility, UBS continues to view US equities as among the most attractive globally.

The bank maintains its $310 earnings-per-share (EPS) forecast for 2026 and cites several factors supporting market growth.

The factors include robust corporate profit growth, a Federal Reserve that remains supportive of equities, and ongoing adoption and monetisation of artificial intelligence technologies.

Analysts at UBS also emphasised that while geopolitical events may trigger short-term market volatility, long-term fundamentals for US equities remain supportive.

US market today

US stock futures moved lower on Tuesday as a deadline set by Donald Trump for Iran to reopen the Strait of Hormuz approached, with expectations of a near-term agreement fading.

Futures linked to the Dow Jones Industrial Average fell 201 points, or 0.4%. S&P 500 futures declined 0.5%, while Nasdaq 100 futures were down 0.6%.

According to a report by The Wall Street Journal, negotiators are not optimistic about reaching a deal between the US and Iran before the deadline.

Trump reiterated on Monday that the US could target Iran’s infrastructure, including power plants and bridges, if the Strait is not reopened by 8 p.m. ET on Tuesday.

He added that the deadline had been extended by a day, citing timing concerns around Easter.

“They have ’til tomorrow,” Trump said, adding that negotiations appear to be ongoing and that several countries are involved in efforts to resolve the situation.