Can the S&P 500 quickly recover from geopolitical shocks? Goldman Sachs offers their view.

Investing.com - Goldman Sachs states that recent market trends during the Iran conflict are similar to historical patterns seen in past geopolitical risk events.

Since last Friday, with the escalation of the latest Middle East situation, the S&P 500 has fallen about 2%, experiencing significant volatility this week. Goldman Sachs strategist Ben Snider noted in a report that, looking back at seven similar events since 1950, “the S&P 500 on average declines 4% in the first week but recovers within the following month.”

Use InvestingPro to gain in-depth insights into the market impact of the Iran conflict.

While short-term corrections are normal, the outlook for the stock market largely depends on the evolution of energy markets and economic growth. The strategists said that moderate increases in oil prices should have limited direct impact on U.S. economic growth and inflation. They pointed out that a sustained $10 per barrel increase in oil prices would reduce GDP growth in 2026 by about 10 basis points and raise core CPI by less than 5 basis points.

Rising oil prices often have offsetting effects on corporate profits. Energy companies benefit from higher crude prices, while consumer-facing sectors and industries that use oil as an input face pressure. Therefore, Goldman Sachs expects the overall impact on S&P 500 earnings to be “roughly neutral,” although performance will vary across sectors.

For the stock market, a greater risk is a long-term disruption of oil supplies, which could hamper economic activity. Goldman Sachs estimates that “a 1 percentage point change in U.S. real GDP growth corresponds to a 3-4% change in S&P 500 earnings per share.”

The strategists added, “The ongoing increase in uncertainty also threatens stock valuations, corporate confidence, and the initial rebound in industrial activity, which has recently driven gains in many ‘old economy’ cyclical stocks.”

Beyond oil, the team stated that AI investment trajectories remain a key driver of profit growth. Goldman Sachs estimates that AI investments and AI cloud services will account for about 25% of S&P 500 earnings growth in 2025, potentially contributing around 40% of the growth by 2026.

AI is also expected to ultimately boost overall S&P 500 earnings through productivity improvements, but the strategists said they currently see little evidence of a significant impact.

This article was translated with the assistance of artificial intelligence. For more information, please see our Terms of Use.