Barclays has raised its year-end 2026 target for the S&P 500 index from 7400 to 7650, suggesting that stronger corporate earnings, particularly within the technology sector, could help mitigate risks stemming from Middle East conflicts, rising oil prices, inflation, and stress in the private credit market.

This new forecast implies an approximate 16% upside from Monday's closing level of 6581.00. Strategists noted in a Tuesday research report that the United States continues to offer stronger nominal growth, though they anticipate a bumpy path ahead.

The bank also increased its 2026 earnings per share (EPS) forecast for the index from $305 to $321. It clarified that this adjustment reflects an improved earnings foundation rather than more expensive valuations. However, it cautioned that persistently strong oil prices could drive inflation higher, potentially limiting the Federal Reserve's flexibility on interest rates.

Barclays outlined a bear-case scenario for the S&P 500 at 5900. It warned that if market sentiment weakens, increased redemption pressures on private credit funds could exacerbate any sell-off.

Additionally, the bank has adopted a more constructive view on U.S. industrial stocks and has modestly upgraded its ratings on materials and energy sectors. This shift is based on expectations of improved industrial activity, increased spending related to artificial intelligence, and support from rising energy prices.