UBS Predicts Stocks to Rise After US-Iran Conflict Resolution
UBS has issued analysis suggesting that several stocks are positioned to outperform if the two-week ceasefire between the U.S. and Iran is extended or a formal peace is established. The bank's strategist, Andrew Garthwaite, scored companies based on commodity exposure, pricing ability, and sensitivity to supply shocks. Potential beneficiaries include Southwest Airlines, Procter & Gamble, and UPS, as these stocks have experienced notable declines during the conflict. Conversely, UBS warned that defense contractors like Lockheed Martin and energy producers such as Exxon Mobil might face significant losses in a period of peace.
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UBS suggests several stocks are poised for outperformance if the current two-week ceasefire between the U.S. and Iran is extended or a formal peace agreement is reached. The Swiss bank utilized a proprietary scoring system to assess how different equities are positioned relative to the geopolitical tensions.
UBS Analysis Methodology
Andrew Garthwaite, a strategist at UBS, developed a scoring model based on three key metrics to quantify a stock's potential impact from a resolution to the conflict. These yardsticks include:
Commodity Exposure: The degree to which the company is exposed to Middle Eastern commodities.
Pricing Ability: The company's capacity to maintain pricing power.
Sensitivity to Past Supply Shocks: How vulnerable the company is to disruptions.
Stocks were ranked on a scale of plus or minus 10, indicating potential gains or losses upon the cessation of hostilities. The analysis also factored in the degree of underperformance observed in the market since the conflict began in late February.
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Potential Beneficiaries of Peace
UBS highlighted several sectors and companies expected to benefit from de-escalation, particularly those that have fallen significantly during the period of conflict:
Southwest Airlines: The airline was noted as a potential winner, having fallen by over 25% at its lowest point during the war. Previously, analysts had upgraded the stock based on expected profit boosts from initiatives like assigned seating and checked bag fees.
Procter & Gamble (P&G): The consumer goods company, maker of Ivory soap and Crest toothpaste, was identified as another potential winner. As of Monday's close, P&G was trading at levels significantly below its pre-war valuation.
United Parcel Service (UPS): The shipping giant is also expected to gain if further conflict is avoided. UPS had seen a notable decline during the hostilities.
Sectors Poised for Decline
Conversely, UBS's scoring system indicated that certain industries could face substantial losses if peace is achieved. These sectors include:
Defense Companies: Examples cited include Lockheed Martin and RTX.
Energy Producers: Companies such as Exxon Mobil and ConocoPhillips were flagged as potential losers.
