JPMorgan Sees Iran-Driven Selloffs as Buying Opportunities on Strong Earnings Outlook

JPMorgan strategists are advising investors to view market weakness stemming from the conflict with Iran as a buying opportunity, arguing that a surprisingly resilient corporate earnings outlook will continue to support equities through the second half of the year.

Earnings Resilience Underpins Bullish Stance

In a note to clients on Monday, strategists led by Mislav Matejka reiterated their bullish case for equities, which is primarily based on a strong earnings forecast. They noted that despite geopolitical uncertainty in the second quarter, 2026 earnings per share (EPS) projections have continued to move higher across all regions, not just within the Information Technology and Energy sectors.

While consensus Q2 earnings growth projections appear high at 22% year-over-year in the U.S. and 12% in the eurozone, JPMorgan sees the median EPS growth forecast of 8% for both regions as a more realistic and "very achievable" target. The bank highlighted that unlike typical cycles where estimates are revised down before results, this period has seen continued upward revisions.

Geopolitical Dips Viewed as Transitory

JPMorgan is encouraging clients to capitalize on market downturns related to the renewed conflict. "Iran conflict is flaring up again, but we think one keeps using the dips driven by this to add, the same stance we had since 2nd half of March," the strategists wrote.

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This recommendation is based on the view that the market has become more efficient at pricing in geopolitical risk as a temporary event. The bank's team believes there are strong incentives on both sides of the conflict to de-escalate, limiting the potential for a prolonged market selloff.

Broader Market and Sector Outlook

JPMorgan's positive outlook is supported by several improving economic indicators, including:

• A pickup in the OECD leading indicator
• A jump in eurozone economic surprises into positive territory
• Continued improvement in eurozone credit growth
• Resilient U.S. jobless claims

The strategists also noted that eurozone earnings revisions have turned positive and are closing the gap with the U.S. for the first time since early 2025. At the sector level, the bank expects Banks to deliver reassuring results and sees Semiconductors as positioned for a rebound. However, they cautioned that the Energy sector no longer offers a significant valuation cushion against swings in oil prices.