We’ve previously described financial markets as being in a discovery process when it comes to how the situation in the Middle East is impacting US public companies and will do so in the future. Last week was an important one in 1Q26 reporting season as we got a diverse set of companies in terms of sector representation. We’re eager to learn more this week when 168 S&P 500 companies are scheduled to report. Here’s what jumped out from last week:
On the broader macro outlook
Companies generally emphasized the resilience of their businesses. Some noted that demand was steady or that they weren’t seeing material impacts from the war yet, while others highlighted the strength of the AI/datacenter theme. Still, a sense of caution came through. Some described the macro as uncertain and dynamic, while one noted that they had seen an increase in concerns about inflation by their customers. The ongoing impacts of high interest rates and inflation on housing and autos were referenced.
A few noted they were maintaining guidance while referring to their desire to stay conservative. One company noted: “Absent the uncertainty in economic conditions related to the Iran conflict, we would have raised our full-year guidance based on our strong first-quarter results.”
Digging deeper into the Iran war
While some companies noted that they weren’t seeing adverse impacts due to the war, others discussed some that they were seeing or anticipated seeing in the future. One Industrial company quantified a modest revenue impact while another noted they had experienced project delays in the region. Meanwhile, one software company reported a headwind from deal closings in the region.
Other topics discussed included higher jet fuel and diesel costs, future impacts to air travel demand, facility shutdowns, the use of alternative supply routes, and the use of hedges and other mitigation tools.
"There has been a lot of conversation about the resiliency of the earnings backdrop in the US, which we and others have attributed in part to the strength of the AI theme and its insulation from the conflict in the Middle East."
Lori Calvasina, Head of U.S. Equity Strategy, RBC Capital Markets
Regarding the potential duration of the conflict, some noted the situation was difficult to predict, while a few indicated that they were baking in a continuation of the conflict through 2Q26 or summer. Other thoughts on timing included one company noting they were hopeful the flow of materials would return in a few weeks, while an airline noted they had visibility for 4-5 weeks, and a software company observed there could be energy impacts in Europe if the Strait of Hormuz stayed closed another few weeks.
A few companies highlighted their ability to pass on or recoup higher costs. Inventory is another topic we’re keeping an eye on. One consumer company noted there might have been some pull-forward by retailers but said they didn’t think consumers were pantry loading. Another company also noted they had not experienced pull-forward in demand.
Consumers are considered “cautious but stable.” This phrase was used by one Consumer company, which we think did a good job of summarizing the overall vibe. Another company described demand as “measured” and “healthy,” another used the term “steady,” and yet another noted no discernible shift in consumer behavior. An airline noted they were not seeing demand destruction but thought it was wise to prepare for it. Several companies noted the benefit of higher tax refunds, but one added that consumers were using those dollars cautiously. K-shaped consumer dynamics were referenced by several companies. Affordability, and inflation and interest rate pressures taking a toll were noted.
There has been a lot of conversation about the resiliency of the earnings backdrop in the US, which we and others have attributed in part to the strength of the AI theme and its insulation from the conflict in the Middle East. When it comes to the rest of the market, what we read last week continues to help us understand why we haven’t seen significant deterioration in 2026 EPS growth forecasts broadly. What we read makes us think the real risk may ultimately lie in 2027 forecasts, but that it is premature to make that call.
