UBS has reaffirmed a positive view on global equities while cautioning investors about near-term energy shocks tied to the current U.S.-Iran conflict. In a client note led by strategist Fabian Deriaz, the bank described left-tail risks as elevated if interruptions to energy shipments persist, adding that the Strait of Hormuz is effectively closed.
Despite that warning, UBS remains constructive on the broader investment backdrop. The bank said it anticipates de-escalation "within the next few weeks" and continues to judge the overall environment as supportive for risk assets.
UBS argued that geopolitical shocks tend to be "on average, quickly bought," but stressed the need for diversification and active risk management while energy flows remain disrupted. The firm listed several macro supports that underpin its stance, including easing tariff pressures, expected Federal Reserve rate cuts, and accommodative fiscal measures.
On corporate profits, UBS projects 12% earnings growth for the MSCI AC World Index this year and expects a broadening of earnings momentum through 2026. The bank noted that persistently higher oil prices would have negative implications for growth, inflation, and central bank policy settings, but it does not view a protracted conflict as the base case. UBS cited the "high political costs for the US to prolong the conflict" as a reason it judges a drawn-out war unlikely.
In scenarios where tensions ease, UBS believes the impact on equities will be limited and that major markets - including the U.S., the Eurozone, Japan, and emerging markets - should continue to perform. The bank expects investors, once volatility diminishes, to return focus to medium-term drivers such as a cyclical recovery and developments in AI and U.S. technology.
From a thematic standpoint, UBS continues to recommend diversified exposure to structural themes it sees as attractive, naming AI, power and resources, and longevity among them. Within the AI theme, the bank advises a more selective stance rather than broad, indiscriminate exposure.
UBS reiterated that its base case remains one in which the growth outlook is supportive, and on that foundation it has maintained its bullish recommendation on global equities, while underscoring the importance of risk controls until energy channels return to normal.