World geopolitical tensions could impact record US stock rally

The Middle East war poses a significant risk to earnings as boycotts and Red Sea shipping chaos disrupt supply chains.

This could impact the record rally in US stocks, as expectations for profits at S&P 500 companies for the next 12 months are at a record high. The war could lead to higher crude prices and inflation as container ships avoid the Red Sea and Suez Canal.

Bank of America’s latest fund manager survey showed that investors see geopolitics as the second biggest risk to share prices after inflation. Heineken, Adidas, Tesla, ResMed, Cisco Systems, Albemarle, Philip Morris International, and CSX are among S&P 500 firms monitoring the situation in the Red Sea.

Some firms have benefited from the situation, such as Dutch firm Royal Vopak and A.P. Moller-Maersk. The conflict has also impacted the earnings of major US businesses, with McDonald’s and Starbucks expecting no meaningful improvement until a resolution is reached.