As a two-week ceasefire between the U.S. and Iran heads toward expiration on Wednesday, UBS thinks several stocks can outperform if the truce is extended or a formalized peace is reached. In a note out Friday, Andrew Garthwaite, the Swiss bank’s strategist, created a score using three yardsticks to quantify how individual stocks are affected by the U.S.-Iran war: Commodity exposure to the Middle East Pricing ability Sensitivity to past supply shocks Stocks were ranked on a scale of plus or minus 10, representing companies that will either win or lose if peace finally breaks out. UBS also factored into its analysis the degree of underperformance since the start of the war in late February. Southwest Airlines , which at its bottom during the war fell more than 25%, is regarded as a beneficiary if hostilities end. Before the war, UBS analyst Atul Maheswari in February upgraded the stock to buy, betting that new initiatives like assigned seats and checked bag fees will boost profits. The tumult of the war didn’t change that investment rating. Procter & Gamble is another potential winner. As of Monday’s close, the Ivory soap and Crest toothpaste maker was 14% below its pre-war level, when P & G had already gained 17% in just the first two months of the year. Through Monday, P & G was little changed on the year, excluding its 3% dividend. United Parcel Service also stands to gain if further conflict is avoided. Before the war broke out, the Atlanta-based shipper had also climbed 17% in the first two months of the year. At the bottom, UBS had fallen 18% in the midst of hostilities. UPS analyst Thomas Wadewitz wrote in February that UPS shares were undervalued relative to its likely earnings, and said the stock offered investors potential upside. Peace would also bring likely losers as well. UBS said its scoring system showed those stocks that could suffer the most are defense companies such as Lockheed Martin and RTX and energy producers including Exxon Mobil and ConocoPhillips .
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