Even amid concerns that the Iran conflict could materially disrupt the outlook, profit forecasts for U.S. companies have remained resilient. Consensus forecasts call for over 20% year‑over‑year S&P 500 earnings growth in 2026, with strength broadening beyond the largest mega‑cap companies. This suggests investors remain focused on underlying business fundamentals over short‑term headlines for now.
The chart illustrates the evolving expectations for 2026 S&P 500 earnings forecasts, excluding the energy sector. Despite the conflict, which began in late February, ex‑energy earnings forecasts have continued to rise. This sector exclusion is intentional. Given that the United States is a net energy exporter, many domestic energy producers stand to benefit from higher oil prices, which could otherwise obscure underlying earnings trends across the broader market. Notably, this earnings resilience has been complemented by modest valuation improvement, with forward P/E multiples settling back into the low‑20s.
Several pre‑war tailwinds also remain firmly in place, including fiscal support and business‑friendly incentives from the One, Big, Beautiful Bill Act, ongoing investment tied to the AI buildout, and evidence that underlying disinflationary trends (excluding energy) remain intact — factors that should help offset the potential drag from higher gas prices.
While geopolitics can spark short‑term volatility, long‑term market outcomes continue to be anchored by earnings quality, momentum, and fundamentals. For investors, the importance of diversification and long‑term discipline remain paramount.
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