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Asset management giant BlackRock raised its outlook for U.S. stocks, reasoning that contained impacts from the Iran war and strong corporate earnings will create a favorable backdrop for domestic equities.

The firm, which manages $14 trillion for clients, said in its weekly market note that it raised the rating a notch to overweight from neutral.

Developments in the war had made BlackRock cautious on domestic stocks. But it said prospects for a lasting ceasefire now have strategists believing that the impacts won’t be major.

“We saw two signposts that would lead us to re-up risk after reducing it a few weeks ago. First, tangible evidence of actions that would reopen flows through the Strait of Hormuz. And second, visibility on the lingering macro impact being contained,” the firm said. “This comes as expectations for corporate earnings have climbed for both the U.S. and [emerging markets] for 2026 – even since the conflict began on Feb. 28.”

Moreover, the BlackRock strategists said “the threshold for the U.S. and Iran to go back to war is high,” further limiting potential damage.

At the same time, prospects for corporate profits appear bright.

With earnings season just getting underway, S&P 500
companies are expected to post a collective 12.6% profit increase in the first quarter, according to FactSet. If historical beat rates hold, that would rise to 19%, the forecasting firm said.

Moreover, technology profits are expected to grow 45% this year, yet the sector has seen only a marginal gain this year.

BlackRock said that has put the valuation of information technology against the other 10 S&P 500 sectors at its lowest since mid-2020.

“We re-up risk in the U.S. and EM due to strong corporate earnings expectations and limited accrued damage to global growth,” the strategists said. “We focus on profit margins this Q1 U.S. earnings season and still favor thematic opportunities like defense.”

The two regions are the only overweights BlackRock has in its equity portfolio.