UBS: Market Overreacting to Middle East Tensions, Bullish on Gold and Defense

UBS analysts believe the latest geopolitical turmoil in the Middle East is triggering a classic overreaction from global markets, a pattern they say has repeated itself across history—from Brexit and the 1989 Tiananmen Square crackdown to Trump’s election in 2016.

In a note released Monday, UBS emphasized that the Israel-Iran conflict is unlikely to disrupt global oil supply in a material way, and maintains that long-term equity fundamentals remain supportive.

Geopolitical Shock ≠ Oil Shock

Unlike the 1979 Iranian Revolution or Iraq’s 1990 invasion of Kuwait, which materially altered global oil supply, the current conflict hasn’t touched production infrastructure. UBS notes:

• Iran exports ~1.7 million barrels/day, just 1.6% of global supply.

• No confirmed hits on oil infrastructure or shipping.

• OPEC's spare capacity remains at ~6 million barrels/day.

Investors can monitor real-time updates on commodities with the Commodities API, including daily oil prices and fluctuations linked to geopolitical risk.

Equities: Buy the Dip?

UBS says the risk-off sentiment is likely transitory. Its view:

• Mild pullback likely in the near term.

• No structural damage to risk assets expected.

• Buy into weakness—especially across:

  • Gold stocks (UBS forecasts $3,500/oz by end-2025).

  • Defense (non-cyclical and structurally underpinned).

  • Global AI productivity plays.

UBS’s “Bubble Scenario” projects a 16% upside for the MSCI AC World Index, with macro support from potential policy easing, resilient wage growth, and AI-driven margins.

For longer-term directional guidance on equities, the Price Target Summary API can help assess whether analyst sentiment aligns with UBS’s call for upside across defense and tech-heavy sectors.

Bottom Line

UBS isn’t shifting its global strategy despite rising market volatility. In fact, it recommends leaning into current weakness—with a focus on gold, defense, and long-term productivity themes—as the smarter play.