Oil prices surge relentlessly! Goldman Sachs: S&P 500 could plunge 19% to 5400 points in worst-case scenario

Caixin March 17 News (Editor: Bian Chun) As the Iran conflict enters its third week, the U.S. stock market remains volatile, but Goldman Sachs says this turbulence has also created some new investment opportunities.

In a recent report to clients, Goldman Sachs strategists noted that the U.S.-Iran conflict has triggered recent stock market fluctuations and stated that they believe U.S. stocks still face “downside risks” because the S&P 500 index is already highly valued, and rising oil prices could further pressure the market.

Although the bank still expects the stock market to eventually rebound, the strategists said that in the most extreme oil shock scenario—where crude oil prices rise to $150 per barrel—the S&P 500 could plummet as much as 19%, to 5,400 points.

The S&P 500 has fallen about 3% year-to-date, reflecting multiple risk-averse events investors have faced over the past few months, starting with the “AI panic trading” that triggered a large rotation out of tech stocks.

The strategist said: “Rising oil prices and increasing uncertainty have disrupted the cyclical economic acceleration that supported our investment recommendations early 2026.” They added that, given the more challenging environment facing the current stock market, they are adjusting several investment recommendations.

On Tuesday, international oil prices surged sharply, reversing the previous day’s decline. As of press time, both U.S. crude futures and Brent crude futures rose over 3%, amid strong concerns over oil supply disruptions caused by the U.S.-Iran war.

Although some ships have reportedly successfully passed through the Strait of Hormuz, the route remains largely closed. Additionally, U.S. President Trump called on countries to assist in escorting ships through the Strait, but most U.S. allies refused.

Below are the three major market areas Goldman Sachs believes investors should focus on:

1. Materials and Healthcare Stocks

Goldman Sachs states that they currently favor secular growth stocks with long-term growth potential over cyclical growth stocks that are closely tied to the economic and business cycle narratives.

The bank particularly recommends the materials and healthcare sectors, which have underperformed the S&P 500 over the past year. In the last 12 months, the S&P 500 materials sector rose 15%, while healthcare increased by 4%.

Goldman Sachs pointed out: “The window for cyclical trading opportunities based on the economic acceleration expected in the first half of 2026 is closing rapidly.” They also said they are no longer recommending stocks related to middle-income consumers or non-residential construction cycles.

2. Solar Stocks

Goldman Sachs believes solar energy is another long-term growth theme expected to benefit over the next few years. Strategists note that data centers will demand strong energy consumption by the end of this decade, and recent oil price surges are also favorable for the solar sector.

They wrote: “Solar energy is likely to become one of the power sources for data centers, and the recent surge in oil and gas prices further strengthens this investment thesis.”

Invesco Solar ETF has risen 7% so far this year, outperforming the 3% decline of the S&P 500 this year.

3. Cybersecurity Stocks

Strategists said that within the broader software sector, they are optimistic about cybersecurity stocks. This year, the software sector has been hit hard due to investor concerns that AI tools will replace many enterprise applications.

So far this year, the iShares Expanded Tech Sector ETF has fallen 17%, while the iShares Cybersecurity and Tech ETF has only declined 5%.

The strategists noted: “During market stress, cybersecurity stocks tend to be less volatile than the overall software sector. Additionally, recent reports suggest that the Iran conflict could trigger potential cybersecurity risks.”