Goldman: Geopolitical Risks Won't Deter US Equities Recovery

Goldman Sachs has weighed in on the recent market volatility sparked by the Iran conflict. According to their analysis, the S&P 500's decline of about 2% since last Friday is not unusual, given historical patterns seen during past geopolitical risk events.

In a note led by Ben Snider, Goldman strategists pointed out that over seven similar episodes since 1950, the S&P 500 declined by an average of 4% in the first week but recovered within the subsequent month. They expect modest increases in oil prices to have limited direct effects on U.S. growth and inflation.

Goldman estimates that a sustained $10-per-barrel rise in oil would reduce 2026 GDP growth by roughly 10 basis points while increasing core CPI by less than 5 basis points. The impact on S&P 500 earnings is expected to be 'roughly neutral', with varying performance across sectors.

The bigger risk to equities, according to Goldman, would be a prolonged disruption to oil supply that drags on economic activity. They estimate that every 1 pp change in real U.S. GDP growth corresponds to a 3-4% change in S&P 500 EPS.