Investing.com — Wells Fargo analyst Ohsung Kwon trimmed the year-end price target to 7,300 from 7,800, citing the Iran war as a main risk that was not part of the brokerage’s base case heading into 2026, while maintaining a structurally bullish longer-term outlook.

The bank’s proprietary PRSM (Profits, Rates, Sentiment, and Macro) model now points to a 14% return over the next 12 months, with S&P 500 earnings per share forecast at $315 in 2026 and $365 in 2027. Wells Fargo used the average price of February 28 and March 30 as its base to smooth the impact of recent selling.

The firm’s war pricing model showed that stocks are now pricing in a bigger risk from the conflict than from oil for the first time.

The ’s forward price-to-earnings (P/E) ratio has contracted 29% since its peak, and roughly one-third of S&P 500 stocks now trade at one standard deviation below their five-year average forward P/E.

“We believe a lot has been priced into stocks already. However, other than a firm resolution, we don’t see many upside catalysts and see the setup skewed more negatively for stocks,” Kwon wrote.

He described the macro setup heading into this week’s data as a “lose-lose” situation. Strong economic data would imply that the Fed is less likely to cut rates, while weak data would fuel stagflation fears and give investors further reason to sell.

Kwon also flagged second-half inflation as a key risk, with Wells Fargo’s inventory-based model suggesting upward price pressure relative to current levels.

But despite the near-term risks, Kwon remains structurally bullish on the U.S. stock market, pointing to five key factors. These include a more contained oil shock than prior historical episodes; a meaningful valuation reset; U.S. energy independence advantages over international peers; hyperscaler free cash flow that may be inflecting higher; and a restocking cycle gaining momentum amid lower tariffs and supply chain disruption.

Equity flows have also remained surprisingly resilient recently. “Equities have surprisingly seen consistent inflows since the war began, a stark contrast to previous episodes of volatility,” Kwon said, suggesting investors are hedging rather than reducing exposure outright. Analyst price target upgrades also outnumbered downgrades in March.

“We concur that the impact will be more mitigated and continue to expect EPS resilience. However, the headwind is building exponentially each day,” the analyst added.