BlackRock upgraded its rating on US stocks to overweight from neutral, saying the Middle East conflict will likely drive limited economic damage.

While shipments through the Strait of Hormuz remain disrupted, there are factors backing a call to dial up risk-taking, BlackRock Investment Institute Head Jean Boivin said. Those include stronger earnings growth expectations for 2026.

Markets see an 18.7% increase in US corporate earnings this year, higher than levels at the start of the year and before the war started.

Tech's valuation premium has come under pressure, but the sector is expected to report earnings growth of 43% in 2026, up from 26% last year, according to the BlackRock report. "These bright spots partly inform our upgrade to US equities," Boivin said.

"We turn moderately positive risk and like US stocks as a relative preference, seeing them holding up better even if absolute performance disappoints," Boivin said.

The breakdown of US-Iran talks could trigger market volatility, but both sides' willingness to negotiate underscores economic incentives to end the conflict, BlackRock Investment Institute said.

Washington and Tehran failed to reach a deal during negotiations in Pakistan over the weekend, fueling concerns about the durability of an already fragile ceasefire between the two sides. US military forces began implementing a blockade of maritime traffic entering and exiting Iranian ports at 10 am ET on Monday.

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