MW As markets wobble on Iran war worries, one big bank is raising its S&P 500 target

By Jamie Chisholm

A sturdy U.S. economy and AI-related activity will boost corporate earnings, says Barclays

Barclays thinks the stock market will do better this year than it previously thought.

As many investors hunker down amid the ongoing U.S.-Israel war with Iran, and more analysts ponder the hit to financial markets from the crisis, one big bank is eschewing the angst.

Barclays U.S. equity strategists on Tuesday raised their price target for the S&P 500 SPX by the end of the year from 7,400 to 7,650, saying that a sturdy U.S. economy and secular growth in artificial intelligence will boost corporate earnings.

The strategists led by Venu Krishna said they accept that "the macro backdrop has become more fragile" amid "war in the Middle East, AI disruption and emerging stress in private credit."

However, they now raise expected aggregate S&P 500 earnings per share this year from $305 to $321 based on three reasons.

First, the fourth quarter of 2025 results season showed that Big Tech and the broader technology, media and telecommunications sectors, continue to beat earnings expectations and raise guidance because of AI-related demand.

Next, Barclays said industrial production in the U.S. continues to improve, while third, sticky inflation, underpinned by rising oil prices "should lift nominal EPS, especially for industrials, energy and pricing-power franchises."

The Barclays team stressed that its S&P 500 price target hike is thus based on better earnings, which places it in line with Wall Street consensus, and not any increase in valuation multiples.

"Our PT goes up on a stronger earnings base, not rerating; we're reducing fair value multiples across the board to account for heightened uncertainty in outcomes for both macro and AI," they said.

Indeed, Barclays said that uncertainty about private credit, alongside the impact of higher commodity prices on the Federal Reserve's reaction function, means it sees a greater risk of its bearish scenario, where the S&P 500 drops to 5,900, where the S&P 500 drops to 5,900, than its bullish scenario where the S&P 500 hits 8,200.

Still, stocks may be supported by what Barclays considers to be more balanced positioning among investors. "Long-only funds have reduced exposure, hedge funds de-grossed moderately, and systematic risk appears more symmetric...there is more dry powder than at the start ofthe year, but the pendulum has not yet swung to under-allocated," the strategists said.

In terms of sectors, Barclays upgraded industrials from neutral to positive as they benefit from a recent pullback in valuation multiples, "a durable cyclical backdrop, and an inflection in manufacturing activity."

Barclays raised the materials and energy sectors from negative to neutral. Parts of the materials complex "are benefiting from rising capex and supply constraints tied to the energy transition and resource nationalism, which are pushing up prices for base and industrial metals," they said.

The energy sector has done very well this year as prices have risen, and Barclays strategists recognize this embeds a very aggressive outlook for oil for much of the year. "However, the longer the conflict drags on, the greater potential for lasting upward price pressure on crude beyond the end of hostilities," they said.

-Jamie Chisholm

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March 24, 2026 09:44 ET (13:44 GMT)

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