RBC Capital Markets says the most recent exchanges between the U.S., Israel and Iran - including strikes and subsequent retaliation - have not forced a change in the broker's year-ahead outlook for U.S. equities. Still, the firm's lead U.S. equity strategist set out five market implications investors should track as the situation develops.
Below is a structured summary of the strategist's core observations and what they mean for markets and specific sectors.
1) Some geopolitical risk was already reflected in prices
RBC's Lori Calvasina emphasized that markets had not been starting from a neutral baseline. The S&P 500 has traded in a sideways pattern in early 2026 and was already facing multiple headwinds described by Calvasina as "AI fears, private markets concerns, an underwhelming reporting season, extended valuations, and an increase in...geopolitical risk." She added that the year's volatility in the S&P 500 and the relative strength in the Energy sector were, to some degree, a reflection of heightened geopolitical risk that markets had been pricing in even before Monday's trading.
2) Elevated national security uncertainty tends to weigh on valuations
Calvasina warned that when national security uncertainty rises sharply, forward price-to-earnings (P/E) multiples for the S&P 500 have historically deteriorated. She cited previous episodes with similar patterns and noted that such spikes in uncertainty typically put downward pressure on valuations rather than directly altering earnings forecasts.
3) Geopolitics is a persistent, post-pandemic factor shaping sentiment
The strategist observed that references to geopolitical risks on corporate earnings calls remain historically elevated since the pandemic. Even so, she noted companies have largely conveyed confidence in their ability to "manage through" disruptions. RBC expects that management messaging to remain focused on resilience for now, while the firm watches whether any of the geopolitical developments begin to erode consumer confidence.
4) Caution is warranted when buying into stocks after shocks
Calvasina cautioned against reflexively buying stocks in the immediate aftermath of geopolitical shocks. While academic and historical work often show equities eventually recover following conflicts, outcomes are far from uniform and are typically intertwined with broader macroeconomic conditions. Geopolitical events tend to be only "a piece of a larger puzzle" when assessing equity performance, she said.
5) Oil is the principal transmission channel to equities
The strategist highlighted oil as the key mechanism through which geopolitical tensions flow into equity markets. Since the pandemic, she said, there has been an approximately -40% inverse correlation between the S&P 500 and oil prices. The critical concern is not a brief spike in oil but whether energy prices rise on a sustained basis and begin to dent confidence.
At the industry level, Calvasina pointed out that Energy typically rises and outperforms during sustained oil strength. By contrast, Capital Goods, Consumer Discretionary Distribution & Retail, Media & Entertainment, and Semiconductors are the groups that generally fall and underperform when oil climbs.
Implications for investors
RBC's framework stresses monitoring volatility, valuation trends, corporate commentary about operating through disruptions, consumer sentiment, and the trajectory of oil prices. The strategist's guidance is cautious: markets may have already baked in some level of risk, but persistent geopolitical uncertainty and a sustained move higher in energy prices are the variables most likely to influence sector performance and aggregate equity valuations.