The Stocks Goldman Sachs Thinks You Should Own as Iran War Stretches Into a Third Week

Key Takeaways

• The stock market will likely weather the fallout from conflict in the Middle East and, after a modest pullback, resume its march higher, according to Goldman Sachs.
• But stocks that Goldman expected to benefit from an acceleration of economic growth this year may not reap those benefits as higher oil prices fuel inflation and drag on consumer spending.

The war in Iran is entering its third week with no end in sight. That, according to Goldman Sachs analysts, warrants some portfolio changes.

Stocks have been on a dramatic ride since the U.S. and Israel launched strikes against Iran late last month. The S&P 500 is down about 2.5%, weighed down by soaring oil prices and the macroeconomic uncertainty they create. The Cboe Volatility Index, Wall Street's fear index, declined sharply Monday amid a stock rebound, but remains above 20, generally considered the dividing line between a calm and jittery market. (Follow Investopedia’s live Monday markets coverage here.)

While trading has been volatile, experts at Goldman Sachs don’t expect the war in Iran to derail the three-year-old bull market. While the conflict has increased downside risks, they wrote Friday “the baseline outlook for US equities remains constructive." Nonetheless, the war has changed Goldman’s outlook for individual sectors and factors.

“Higher oil [prices] and greater uncertainty should cut short the cyclical economic acceleration underpinning many of our investment recommendations heading into 2026,” the analysts wrote. 

Why This Matters

Investors have spent weeks grappling with uncertainty about the duration of the U.S.-Israeli operation in Iran and the long-term consequences of the resultant oil supply disruption. Goldman's updated outlook for stocks suggests experts are leaning toward a relatively balanced positioning that leans defensive.

Goldman is overweight the healthcare and materials sectors, but “no longer recommend[s] stocks exposed to middle-income consumers or non-residential construction.” Low- and middle-income consumers are expected to be pinched by gas prices, which have risen about 25% in the past two weeks, offsetting some of the tax benefits that were expected to flow from last year’s One Big, Beautiful Bill. Non-residential construction, meanwhile, could be dented by elevated energy and transportation costs, as well as heightened uncertainty about the economic outlook. 

Healthcare, an essential service, offers investors protection from a slowdown in discretionary spending. It's been the best-performing sector during past oil shocks, according to Goldman, beating the broader market by 1.5 percentage points and even topping the energy sector, which benefits directly from higher oil prices. That benefit is a primary reason Bank of America analysts on Monday recommended buying energy stocks.

Outside of defensive sectors like healthcare, Goldman sees potential for the war in Iran to lift sentiment on solar and cybersecurity stocks, both of which have been fighting headwinds lately. The Trump administration’s gutting of federal support for renewable energy has darkened the outlook for solar companies, and fear of AI-driven disruption within the software industry has hammered cybersecurity stocks.

Rising oil and gas prices could push AI data center developers to increase their demand for renewable energy, a source of potential upside that Goldman estimates isn’t currently priced into solar stocks. Cybersecurity stocks, according to Goldman, could benefit from both their relative insensitivity to economic cycles and increased cyber threats out of Iran. 

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An economic drag from the war could also set the stage for the hyperscalers—Alphabet (GOOG), Microsoft (MSFT), Amazon (AMZN), and Meta (META)—to reclaim leadership within the AI rally, according to Goldman.

The tech giants have been pressured since late last year by uncertainty about the pay-off of their massive AI investments. While those fears will persist until the group slows its spending or shows AI-linked revenue growth is accelerating, the hyperscalers’ solid balance sheets and healthy businesses could make their stocks attractive during an economic slowdown. 

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