UBS predicts that U.S. stocks like Southwest Airlines and Eastman Chemical are set to outperform as a potential peace deal between the U.S. and Iran finalizes this Friday in Switzerland. Both companies have received positive analyst upgrades and price target hikes, with analysts anticipating increased earnings and market outperformance due to a resolution in the Middle East conflict and favorable industry conditions.
As a landmark Middle East peace agreement moves closer to being finalized, banking giant UBS has pinpointed several U.S. stocks expected to thrive. Among the potential beneficiaries of a U.S.-Iran settlement are industry leaders like Southwest Airlines and Eastman Chemical.
Reports this week confirm that the United States and Iran have successfully reached a preliminary agreement to conclude the Middle East conflict. Both nations have assented to a "memorandum of understanding" and committed to halting military operations. An official signing ceremony is slated for this Friday in Switzerland, marking a pivotal moment for regional stability.
In anticipation of this significant diplomatic breakthrough, UBS compiled a list of U.S. equities poised for outperformance. The bank outlined its selection criteria in a client note, stating, "These stocks have a negative score on our qualitative framework (i.e. most negatively impacted by the conflict), have underperformed since 27/2, are Buy-rated, cheap on [price earnings] relative to the market against their norms and not crowded." Furthermore, UBS highlighted that these chosen stocks are "less crowded than MSCI U.S., and hence may be more likely to outperform."
Southwest Airlines emerged as a key recommendation from UBS. This optimism is echoed by Jefferies analysts, who, in a recent note, maintained a 'hold' rating but notably increased Southwest's price target from $37 to $44. Analyst Sheila Kahyaoglu, following a meeting with Southwest's leadership, conveyed the management's growing confidence:
"Mgmt notes it is increasingly confident that the backdrop of sticky fare increases, industry discipline & exits, and stable-ish fuel supports the ability to achieve > $4/sh of EPS in '26 if demand remains resilient into off-peak."
Shares of Southwest Airlines have already seen a significant 15% surge this year, reflecting investor confidence.
Another prominent name on UBS's list is Eastman Chemical, a specialty chemical producer. JPMorgan also showed strong support for the company, upgrading its rating to 'overweight' from 'neutral' in April. Analyst Jeffrey Zekauskas simultaneously raised Eastman Chemical's price target from $70 to $80 per share. Eastman Chemical's stock has also appreciated by nearly 15% in 2026, with Zekauskas's new forecast suggesting an additional 6% upside.
Zekauskas elaborated on his positive outlook for Eastman Chemical, stating:
"We think that Eastman is a good risk/reward vehicle on a total return basis. We expect Eastman's earnings to experience a positive turn in 2026. We think the company should benefit from higher commodity earnings in the near-term and from a recovery in durable goods manufacturing over a longer term."
