Fidelity International's Analyst Pulse Survey for the second quarter of 2026 shows that many businesses are yet to feel the full cost impact of the renewed Middle East conflict.

(Editor's note: Fidelity International is a separate business from Fidelity Investments.)

Reignited hostilities in the Middle East have renewed concerns over inflation and supply chain disruption, but many businesses have yet to feel the full impact on their costs, according to Fidelity International's latest Analyst Pulse Survey conducted in June.

The quarterly survey of almost 100 of Fidelity’s equity and fixed income analysts found that 55 per cent of those within the companies they cover expect inflationary pressures to increase over the next 12 months as a result of the Middle East conflict.

While many businesses have so far been protected by energy hedging programs and existing inventories, analysts believe that higher energy, freight and raw material costs are likely to become more visible as those protections expire. Consumer, industrial and utilities companies are expected to experience the greatest increase in cost pressures, although analysts anticipate higher input costs across every sector and region.

“The renewed conflict is adding to an already uncertain backdrop for businesses. While many companies have yet to feel the full impact on their cost base, our analysts expect inflationary pressures to become more apparent over the coming months as existing buffers begin to unwind,” Niamh Brodie-Machura, CIO, equities at Fidelity International, said. “The extent to which companies can manage those pressures is likely to become an increasingly important differentiator.”

Despite this difficult environment, analysts expect companies to continue increasing capital expenditure, the survey reveals, with the strongest areas being utilities, energy and information technology. These sectors are expected to play a central role in supporting continued investment in artificial intelligence infrastructure, from power generation and networks to semiconductors and data centers.

Analysts also expect corporate profitability to remain resilient over the next 12 months. Despite higher expected costs, more analysts expect profitability to improve than deteriorate, suggesting that many companies are in a good position for managing inflationary pressures despite a more uncertain operating environment.

“Taken together, the survey highlights three themes shaping markets today: persistent inflation pressures, rising capital expenditure and resilient corporate profitability,” Brodie-Machura, continued. “While geopolitical uncertainty is creating new challenges, many businesses appear well placed to navigate them. For investors, identifying those companies that can continue investing while maintaining profitability will remain critical."