Fidelity International Analyst Pulse Survey: Businesses Yet to Feel Full Cost Impact of Renewed Middle East Conflict - Asian Wealth Management and Asian Private Banking

The resumption of hostilities in the Middle East has 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. The quarterly survey of almost 100 of Fidelity’s equity and fixed income analysts, conducted in June and informed by the team’s ongoing meetings with company management teams, found that 55% expect inflationary pressures within the companies they cover 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 programmes and existing inventories, analysts believe 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. Niamh Brodie-Machura, CIO, Equities at Fidelity International, says: “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. The extent to which companies can manage those pressures is likely to become an increasingly important differentiator.” Companies Continue Investing Despite Rising Cost Pressures Despite this more challenging environment, analysts expect companies to continue increasing capital expenditure. Expectations are strongest in utilities, energy and information technology. These sectors are expected to play a central role in supporting continued investment in artificial intelligence (AI) infrastructure, from power generation and networks to semiconductors and data centres. Utilities, Energy and Technology Lead Expectations of Capital Expenditure Increases Percentage of analysts The chart divides responses into: Moderate decrease About the same Moderate increase Significant increase Sectors covered: Utilities Energy Information technology Materials Industrials Communication services Consumer staples Consumer discretionary Real estate Financials Healthcare Source: Fidelity International Analyst Survey, June 2026. Question: “What are your expectations for capex over the next 12 months?” The chart shows the percentage of analysts covering each sector. Sectors are ordered from highest to lowest by the proportion of analysts who anticipate an increase in capex. 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 many companies remain well placed to manage inflationary pressures despite a more uncertain operating environment. Corporate Profitability Outlook Percentage of analysts expecting EBITDA margins to increase over the next 12 months Communication services - 53% - 56% Consumer discretionary - 47% - 17% Consumer staples - 75% - 27% Energy - 30% - 50% Financials - 38% - 56% Healthcare - 45% - 22% Industrials - 72% - 82% Information technology - 71% - 73% Materials - 86% - 22% Utilities - 67% - 17% Real estate - 40% - 33% Source: Fidelity International Analyst Survey, June 2026. Question: “What are your expectations for EBITDA margins over the next 12 months?” The chart shows the percentage of analysts expecting an increase. Niamh Brodie-Machura concludes: “Taken together, the survey highlights three themes shaping markets today: persistent inflation pressures, rising capital expenditure and resilient corporate profitability. 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.”