UBS: Earnings Strength and Gradual Hormuz Recovery Support Equities

Finance

UBS: Earnings Strength and Gradual Hormuz Recovery Support Equities

UBS maintains a constructive outlook for global markets, citing strong earnings growth and cooling inflation as key factors that could support equities. The bank anticipates a gradual recovery of energy flows through the Strait of Hormuz, which should sustain Brent crude prices and encourage broader commodity exposure.

Robust corporate earnings and moderating inflation may bolster global markets despite geopolitical uncertainties.

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· Updated · 2 min read

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Executive summary

UBS maintains a constructive outlook for global markets, citing strong earnings growth and cooling inflation as key factors that could support equities. The bank anticipates a gradual recovery of energy flows through the Strait of Hormuz, which should sustain Brent crude prices and encourage broader commodity exposure.

UBS's analysis indicates that markets might be undervaluing the resilience of the current earnings cycle amid geopolitical tensions surrounding the Strait of Hormuz. The bank highlights broad-based profit increases across the US, Europe, and Asia, suggesting that investor sentiment has improved, particularly following recent diplomatic developments involving Iran.

The bank's base case suggests that energy flows through the Strait will recover gradually, which supports continued equity market upside alongside robust earnings growth. UBS projects that moderating inflation will allow the Federal Reserve to maintain interest rates at current levels for the remainder of the year, despite recent comments from Fed Chair Kevin Warsh that have raised inflation expectations.

UBS sees potential upside to its 20% earnings growth estimate for the S&P 500 this year, supported by strong consumer spending and improving economic conditions. In Europe, corporate performance is at its highest in over three years, with upward revisions to earnings estimates for the Stoxx Europe 600. In Asia, corporate profits are expected to surge by 72% this year.

On the commodities front, UBS notes that while oil prices may remain below wartime highs, a slower-than-expected normalization of supply will keep Brent crude supported. The bank also advocates for diversified exposure across energy, industrial metals, agricultural commodities, and gold, citing long-term trends such as AI infrastructure development and potential impacts from the current El Niño phenomenon.

Despite weaker gold demand in the second quarter, central bank purchases remain robust, reinforcing gold's role as a strategic diversifier. UBS concludes that while geopolitical risks may lead to short-term volatility, the combination of strong corporate earnings and moderating inflation should create a favorable environment for global markets through the end of the year.

Market impact

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NIC · Impact scores

Global: 100 · Market: 100 · Urgency: 60 · Confidence: 90 · Neutral

Themes: inflation, rates, geopolitics, energy, precious_metals

Asset impact

  • Gold — Neutral (55) · Gold mentioned with balanced cues.
  • Oil — Neutral (55) · Oil mentioned with balanced cues.
  • EUR — Neutral (55) · EUR mentioned with balanced cues.
  • US Stocks — Neutral (55) · US Stocks mentioned with balanced cues.
  • Commodities — Neutral (55) · Commodities mentioned with balanced cues.
  • Forex — Neutral (55) · Forex mentioned with balanced cues.
  • Indices — Neutral (55) · Indices mentioned with balanced cues.

Market reaction

  • XAUUSD: 4056.995 → 4056.995 (0%) · T-15m / T0 / T+15m / T+60m
  • USOIL: Price snapshot pending · T-15m / T0 / T+15m / T+60m
  • EURUSD: 1.1523500000000002 → 1.1523500000000002 (0%) · T-15m / T0 / T+15m / T+60m
  • SPX: Price snapshot pending · T-15m / T0 / T+15m / T+60m
  • DJP: Price snapshot pending · T-15m / T0 / T+15m / T+60m
  • FX: Price snapshot pending · T-15m / T0 / T+15m / T+60m

Trading insight

Analysis only. Not a trade signal. Not investment advice. No Entry/TP/SL is generated by NIC.

Scenarios

  • Two-way reaction likely until the market digests the data surprise vs forecast.
  • Whipsaw risk is elevated inside the first 15–60 minutes after release.
  • For XAUUSD, map USD/rate impulse first, then confirm direction on M15 structure.

Watch factors

  • Actual vs forecast surprise (priced-in risk)
  • USD / yields impulse if macro-sensitive
  • Liquidity and spread during the news window
  • Follow-through after T+15m / T+60m
  • Relative reaction in gold
  • Relative reaction in oil
  • Relative reaction in eur
  • Relative reaction in us_stocks

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