If the Middle East conflict eases, airlines, travel, and parts of the consumer/auto chain may benefit, while defense, aluminum, and some commodity beneficiaries may come under pressure

Overview

This report extends UBS's previous research on the impact of a Middle East ceasefire, focusing on which global stocks may benefit the most and which may lag if the Middle East conflict enters an extended ceasefire or is ultimately resolved. The report covers stocks in MSCI US, MSCI Europe, and MSCI AC Asia Pacific, using event impact, valuation, and crowding to screen for potential relative winners and losers.

Core views

The core view is that easing conflict generally benefits airlines, travel, autos, and some consumer/industrial companies previously pressured by energy, fuel, supply chain, or travel-demand headwinds; meanwhile, defense, aluminum, mining, and some energy/utilities companies that benefited during the conflict from defense demand, commodity prices, or supply tightness face the risk of relative performance reversal if the ceasefire holds.

Analysis framework

UBS first uses LLM tools to score global stocks across three factors: Middle East commodity exposure, pricing power, and historical performance during supply shocks; it then combines relative share-price performance versus MSCI ACWI or regional indexes since February 27, performance since April 8, P/E z-score versus the market, HOLT valuation, earnings revisions, crowding, and UBS ratings to identify potential outperformers and underperformers in a ceasefire scenario.

Methodology notes

• Scenario screeningScoring for stocks benefiting or being hurt by a Middle East conflict ceasefire

  Composite score from -10 to +10

  A lower score indicates a stock was more negatively affected by the conflict and is more likely to rebound if the conflict is resolved; a higher score indicates a stock benefited more from the conflict and is more likely to reverse if the ceasefire continues.

• Factor weightsThree-factor qualitative scoring

  Commodity exposure 50%, pricing power 25%, historical supply shock 25%

  Commodity exposure focuses on Middle East-related inputs such as crude oil, refined products, LNG, LPG, petrochemical feedstocks, fertilizers, helium, and aluminum; pricing power focuses on cost pass-through and price elasticity; historical shocks focus on performance during Covid, the Russia-Ukraine conflict, and the 2011 Middle East unrest.

• Valuation and trading structureP/E versus market, HOLT, and crowding screen

  Use fundamentals and position crowding to confirm event-reversal potential

  Potential beneficiary stocks need to be relatively cheap and uncrowded; potential underperformers are more often richly valued, crowded, and rated Neutral or Sell.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Airline and travel-related stocks

  Potential beneficiary

  Strengths

  As fuel costs and geopolitical risk premiums decline, earnings expectations and risk appetite may improve; some stocks have underperformed and have lower valuations.

  Weaknesses

  Demand, costs, and exchange rates may still fluctuate; if the ceasefire proves unstable, the rebound may be limited.

  Comparison

  Compared with defense and commodity beneficiaries, airlines and travel are more of a risk-premium normalization trade after conflict resolution.

  Risks

  A renewed rise in oil prices, ceasefire breakdown, weaker macro consumption, or company execution risk.

• Defense stocks

  Potential underperformer

  Strengths

  During conflict periods, orders and budget expectations are usually more supported.

  Weaknesses

  If the conflict cools, event premiums may compress; some companies have rich valuations and crowded positioning.

  Comparison

  Compared with airlines and travel, defense stocks are more like beneficiaries of prolonged conflict, with lower relative appeal in a ceasefire scenario.

  Risks

  Renewed geopolitical escalation, continued upward revisions to defense budgets, or earnings beating expectations could offset the pullback.

• Aluminum, mining, and parts of the commodity chain

  May come under pressure or diverge in a ceasefire scenario

  Strengths

  They benefit clearly when supply is tight and commodity prices rise.

  Weaknesses

  Conflict easing may reduce commodity risk premiums, and some stocks have already outperformed and trade at rich valuations.

  Comparison

  In contrast to downstream industries hit by cost shocks, upstream commodity-exposed companies may lag when risk premiums decline.

  Risks

  Actual supply constraints do not ease, inventories remain low, demand is stronger than expected, or sanctions/shipping disruptions persist.

• Autos, consumer services, and some industrial stocks

  Selective beneficiary

  Strengths

  If energy and supply-chain pressures decline, both costs and valuations may improve.

  Weaknesses

  The quality of any rebound will still depend on the sector's own cycle, end-demand, and competitive dynamics.

  Comparison

  Compared with pure airline stocks, these sectors' ceasefire benefits depend more on the combined effect of cost, demand, and valuation repair.

  Risks

  Economic slowdown, insufficient demand, or lower costs failing to translate into margin improvement.

Key data

• Commodity exposure weight50%Covers Middle East-related inputs including crude oil, refined products, LNG, LPG/naphtha, ammonia/urea, helium, aluminum, and others.
• Pricing power weight25%Measures a company's position in the value chain, cost pass-through ability, demand elasticity, and ability to benefit from temporarily high prices.
• Historical supply shock weight25%References historical shocks including Covid, the 2022 Russia-Ukraine conflict, and the 2011 Middle East unrest.
• Potential beneficiary stock screening thresholdComposite score below -2.5Indicates the company is more negatively affected by the conflict and may rebound if a ceasefire holds or the conflict is resolved.
• Potential underperformer screening thresholdComposite score above 4Indicates the company is more positively affected by the conflict and may face a reversal in relative performance if the ceasefire continues.
• Examples of potential US beneficiariesSouthwest Airlines、GM、UPS、P&GAmong them, Southwest is less crowded, and the report believes it is more likely to outperform if the ceasefire holds.
• Examples of potential European beneficiariesLufthansa、Ryanair、Continental、Amadeus、AccorThese companies are rated Buy and trade at P/E levels below their own normal relative market levels; Lufthansa, Continental, Amadeus, and Accor are less crowded than MSCI Europe.
• Examples of potential Asian beneficiariesANA、Sands China、Interglobe Aviation、Japan Airlines、Galaxy Entertainment、Nippon SteelThe report says these companies are rated Buy, trade at P/E levels below their own normal levels, and are less crowded than MSCI ACWI.
• Examples of potential US underperformersLockheed、RTX、L3Harris、Alcoa、SolarEdgeAmong them, Lockheed, RTX, and Alcoa are more crowded relative to MSCI US and may be more prone to reversal.
• Examples of potential European underperformersGlencore、SSE、EDP、Leonardo、Norsk Hydro、BrenntagThese companies are rated Neutral or Sell and trade at relatively rich P/E valuations; Glencore and Leonardo are more crowded relative to MSCI Europe.

Impact & implications

If the Middle East ceasefire holds, the market may rotate from conflict-beneficiary assets toward previously pressured assets, creating cross-sector relative-return rotation. The investment implication is not simply to buy all low-score stocks, but to prioritize names that simultaneously have low conflict scores, Buy ratings, cheap valuations, and uncrowded positioning; at the same time, investors should be cautious on previous winners with high conflict scores, rich valuations, and elevated crowding.

Risks

• The ceasefire may not hold or the Middle East conflict may re-escalate, which could invalidate the reversal trades discussed in the report.
• LLM qualitative scoring depends on input information and weight settings and cannot replace company fundamental research.
• Valuation, crowding, and earnings revision data can change quickly with the market, so the screening results are time-sensitive.
• Table recognition quality contains noise, and some stocks and figures should be cross-checked against the original report or UBS data sources.
• Global equity investing also faces currency, country, sector, company-specific, interest-rate, credit, and liquidity risks.

What to watch

• Whether the Middle East ceasefire is extended and whether a formal conflict-resolution framework emerges.
• Price trends in Middle East-related commodities such as oil, LNG, refined products, aluminum, and fertilizers.
• Fuel costs, booking demand, and earnings revisions for airlines, travel, and consumer service companies.
• Relative performance, valuation expansion, and crowding changes in defense, mining, aluminum, and energy stocks.
• Subsequent updates from UBS single-stock analysts on ratings, target prices, and earnings forecasts for key stocks.