Under the impact of the Middle East geopolitical situation, Morgan Stanley and Standard Chartered still maintain their bullish stance on US stocks, but the soaring oil prices will become a major bearish factor.

Local time, February 28th, the United States and Israel launched a large-scale joint military strike against Iran under the codename "Roaring Lion," covering targets such as the presidential palace, military bases, and nuclear facilities in Tehran. Iran's Supreme Leader Ayatollah Khamenei was confirmed to have been killed in the attack, leading Iran to announce the closure of the Strait of Hormuz and launching retaliatory strikes against US military bases. The sudden escalation of geopolitical tensions in the Middle East led to a decrease in investors' risk appetite, coupled with rising oil prices exacerbating inflation concerns. This prompted traders to reduce their bets on the Federal Reserve cutting interest rates this year, causing pre-market futures of the three major US stock indices to drop on Monday. However, strategists at Morgan Stanley believe that the conflict in the Middle East is unlikely to disrupt their bullish outlook on US stocks, unless there is a sharp and sustained surge in oil prices. Analysts at Standard Chartered Bank also pointed out that US stocks can withstand the impact of the escalating situation in the Middle East, and investors can consider buying on dips of 5%-10%. The team of stock strategists at Morgan Stanley, led by Mike Wilson, wrote in a report that historically, geopolitical risk events have not led to sustained volatility in US stocks. They cited the average performance of the S&P 500 index in the months following such events as evidence. The strategists stated that the bearish scenario for the latest Iran conflict mainly stems from a significant and sustained increase in oil prices, which could disrupt what they believe is a strengthening business cycle. They stated, "Unless oil prices spike and remain at historically significant levels, recent events are unlikely to change our bullish view on US stocks over the next 6 to 12 months." The team had set a target of 7800 for the S&P 500 index by the end of 2026 in a research report released in January, characterizing it as a broad-based stock market bull market under a rolling recovery. They advocate for a return of market risk preference and an upswing in several cyclical industries, with cyclicals leading the second phase of the bull market. The beginning of the year has been challenging for the S&P 500, with US stocks underperforming international markets due to concerns about risks posed by artificial intelligence (AI) disruption and the impact of Trump administration policies. For Wilson, the healthcare sector remains the preferred defensive allocation due to its cheap valuation, improving profitability, and reduced policy uncertainty, factors that have helped attract broader investor interest. However, Lori Calvasina, a strategist at Royal Bank of Canada, warned against relying too heavily on historical studies that suggest buying on dips during geopolitical bad news. While the bullish view "technically makes sense," she cautioned that this view is driven by trends originating from "relatively contained" conflicts. She stated, "It's difficult to view geopolitical events in isolation from the stock market. Geopolitics tends to be part of a larger puzzle." Meanwhile, analyst Steve Brice at Standard Chartered Bank said the market is relatively well digesting the unprecedented geopolitical shock arising from tensions in the Middle East, with stock market declines currently controlled at around 2%, and the core investment logic remains to buy on clear dips. While acknowledging rising uncertainty, Brice suggested that the market could see a 5%-10% decline, presenting buying opportunities. Brice emphasized that the market entered this period of anxiety against a backdrop of strong fundamentals. He stated, "We are actually in a 'Goldilocks economy' environment. Economic growth is exceptionally robust, US inflation is indeed falling, albeit at a relatively slow pace. We expect the Fed to cut rates, and corporate profits remain solid." However, sustained high oil prices could gradually erode this favorable economic environment. Brice noted that investors are currently focused on assessing potential retracement levels under different scenarios, stating, "I think this is the issue that the market is struggling to figure out - how much of a retracement might we see in the stock market in both the base case and tail risk scenarios, and how should we position ourselves accordingly?" While closely monitoring developments, Brice maintains a preference for risk assets. He described the current environment as "likely a temporary stage, although very different from anything we've experienced before." He also acknowledged the need to remain flexible and willing to adjust investment positions if the situation deteriorates further. The analyst also highlighted key differences between this situation and past military interventions in the Middle East. He noted, "Previous military actions in the Middle East have usually involved ground troops and have been able to relatively quickly control the situation. This time is very different, with a significantly higher risk of retaliatory action in the Middle East." Despite the valid base case, Brice warned that due to the high uncertainty of potential outcomes, tail risks "may be greater than normal." He likened the current actions of the United States and Israel to "a fairly big gamble on several possible evolution paths."