Morgan Stanley strategists led by Mike Wilson maintain a bullish outlook on US stocks despite escalating conflict in Iran and the Middle East. In a note to clients, the team argues that historical geopolitical events have rarely caused sustained volatility in US equities, with the S&P 500 typically recovering within months.

While acknowledging risks from a potential oil price spike, Morgan Stanley believes recent events won't derail their positive view unless prices surge significantly and remain elevated. The strategists see a strengthening business cycle as supportive of their outlook, despite challenges including AI disruption and Trump administration policies that have made US stocks less attractive than international peers this year.

Oil prices surged Monday following US and Israeli strikes on Iran, with traders concerned about the Strait of Hormuz and Saudi refinery operations. European and Asian markets fell sharply, but Morgan Stanley remains focused on healthcare as a defensive play, citing improving earnings and fading policy overhangs. RBC's Lori Calvasina cautioned that historical patterns may not fully apply to current conflicts, noting that geopolitical events are typically part of a larger market puzzle.