RBC Capital Markets maintains its year-ahead outlook for U.S. equities despite Iran-Israel strikes, with strategist Lori Calvasina identifying five critical implications for investors. The S&P 500 has traded sideways in early 2026 due to geopolitical risks, AI concerns, and weak earnings reports, Calvasina noted.

While the Energy sector outperformed amid heightened tensions, broader market volatility reflects persistent uncertainty. Geopolitical shocks historically pressure valuations, as seen during the Russia-Ukraine war and COVID-19, though outcomes depend on macroeconomic backdrops. Oil prices remain pivotal, with a -40% inverse correlation to the S&P 500 since the pandemic; sustained energy cost spikes could erode investor confidence. At the sector level, Energy gains contrast with declines in Capital Goods, Consumer Discretionary, and Semiconductors. Market resilience hinges on companies’ ability to navigate disruptions while avoiding consumer confidence erosion.