Best Performing Sector During the Iran Conflict May Surprise You
Jeff Buchbinder | Chief Equity Strategist
Last Updated: April 15, 2026
In what should be a surprise to no one, energy has been one of the better performing sectors since the joint U.S.-Israel airstrikes on military targets in Iran on February 27, although it has given up some ground since a two-week cease fire was announced last week. The S&P 500 is up slightly during this period (+1.2%) while the energy sector has gained 0.4% (price appreciation, excluding dividends).
What may surprise you is that gain is only good enough for fifth place in the sector rankings since February ended. Technology is on top with a 5.9% gain. Technology beating energy during an oil price spike is surprising enough, but it comes amid selling pressure in the software industry due to fears of artificial intelligence (AI) disruption. The application software group is down about 5% and some widely held names like Salesforce (CRM) and Workday (WDAY) are down more than 10%.
Technology a Surprising Sector Leader During Iran Conflict
Source: LPL Research, FactSet 04/14/26
Disclosures: Indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results.
How Surprising Is This Technology Strength?
How surprised should we be by this strong performance from technology? Not much, based on the following analysis. Using a hypothetical study of sector performance during oil price spikes over 30%, we find that energy fares best (no surprise). But technology was second in this hypothetical scenario, suggesting that the sector’s relative strength during this period is not an outlier. Technology companies are not a heavy oil users, mitigating the effects of higher oil prices.
Energy Estimates Have Popped, But the Technology Estimate Increases Aren’t Too Shabby
The next question you might ask is whether the strong performance by the technology sector is justified by fundamentals. Fueled by the AI buildout, the technology sector will likely grow earnings at least 44% year over year for the soon-to-be-reported first quarter (source: FactSet). But a strong growth outlook didn’t help sector performance from November 2025 through January of this year when technology underperformed.
We would argue technology strength is justified based on the improvement in the earnings outlook in recent weeks. As shown in the accompanying chart, earnings per share (EPS) estimates for technology in 2026 have increased by more than 6% since March 1. Earnings were expected to grow at a strong clip, but analysts again underestimated the sector’s earnings power. Excellent earnings growth has been anticipated, but we don’t think the market was prepared for a possible 50% increase in technology earnings in the first quarter.
It’s Not Just Energy Helping to Boost Earnings Estimates
Source: LPL Research, FactSet 04/14/26S
Disclosures: Indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. Estimates may not materialize as predicted and are subject to change. EPS is earnings per share.
Tech Sector Valuations Have Become Attractive, If Not Compelling
We also believe recent strength in technology is justified by attractive valuations. The underperformance late last year and early in 2026, coupled with booming earnings growth, brought the sector’s forward (next 12 months) price-to-earnings ratio (P/E) down to near the market at the recent lows. The latest bounce leaves the sector at about an 8% premium to the S&P 500 forward P/E, about in line with the long-term average and still attractive given the strong outlook for earnings growth and robust profit margins.
Relative P/E of the Technology Sector Has Become Attractive
Source: LPL Research, FactSet 04/14/26
Disclosures: Indexes are unmanaged and cannot be invested in directly. Past performance is no guarantee of future results. Estimates may not materialize as predicted and are subject to change.
Conclusion
Technology’s leadership during an oil shock is not particularly unusual, nor is it unjustified. History shows technology tends to perform well during periods of sharply rising energy prices, and today’s fundamentals appear consistent with that pattern, though past performance does not guarantee future results. Improving earnings expectations, driven largely by the AI buildout, have helped restore investor confidence after a period of underperformance. At the same time, valuations remain reasonable relative to both the market and the sector’s history. Technology appears well positioned to remain a relative winner if earnings momentum continues and is a strong candidate for an upgrade on a tactical basis.
EPS stands for earnings per share. This metric tells investors how much money a company makes for each of its shares. EPS is one of the most common ways to gauge a company’s profitability.
Important Disclosures
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk.
Indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
This material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.
Asset Class Disclosures –
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
Bonds are subject to market and interest rate risk if sold prior to maturity.
Municipal bonds are subject and market and interest rate risk and potentially capital gains tax if sold prior to maturity. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply.
Preferred stock dividends are paid at the discretion of the issuing company. Preferred stocks are subject to interest rate and credit risk. They may be subject to a call features.
Alternative investments may not be suitable for all investors and involve special risks such as leveraging the investment, potential adverse market forces, regulatory changes and potentially illiquidity. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.
Mortgage backed securities are subject to credit, default, prepayment, extension, market and interest rate risk.
High yield/junk bonds (grade BB or below) are below investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.
Precious metal investing involves greater fluctuation and potential for losses.
The fast price swings of commodities will result in significant volatility in an investor’s holdings.
This research material has been prepared by LPL Financial LLC.
Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Deposits or Obligations | Not Bank/Credit Union Guaranteed | May Lose Value
For Public Use – Tracking: #1090739
