Stocks Rally: UBS Maintains 7,500 S&P 500 Target After US-Iran Ceasefire

Global stocks surged, and oil prices tumbled on Wednesday after a two-week ceasefire was agreed, with Iran agreeing to reopen the Strait of Hormuz, prompting UBS to lay out its investment playbook for the new backdrop.

Brent crude plunged to around $96.70 per barrel, the S&P 500 closed 2.5% higher, and the Stoxx Europe 600 rose 3.9%. Gold also initially rallied before pulling back while the US dollar index slipped.

UBS said the ceasefire supports its case for equities to end the year higher, reiterating a year-end S&P 500 target of 7,500, which is roughly 10% above current levels, with projected earnings per share growth of 11%.

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The bank’s preferred regional equity markets are the US, Switzerland and emerging markets, with health care, industrials and US utilities favored at the sector level.

Despite the positive developments, UBS cautioned that significant risks remain. Iran’s Revolutionary Guard stated that Strait passage must be conducted “in coordination with Iran’s armed forces,” and key issues, including nuclear enrichment limits and sanctions relief, remain unresolved.

“Oil prices will remain the key barometer of economic and market risks and will continue to guide our positioning with respect to the conflict,” UBS said.

On gold, UBS maintained a year-end target of $5,900 per ounce, describing the metal as a valuable portfolio hedge.

The bank also flagged the energy price pullback as an opportunity to build broad commodity exposure as a hedge against re-escalation, and recommended short- and medium-duration quality bonds as yields remain above pre-conflict levels.