Goldman Sachs' CEO Says Iran Conflict Could Be a 'Headwind' If It Drags On

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Iran is on the bank-executive mind this earnings season.

Goldman Sachs' (GS) first quarter beat—earnings per share and revenue exceeded analyst expectations—is being eclipsed by investor concerns that continued fighting in the Middle East will have an adverse impact on the Wall Street firm's performance. Shares have declined roughly 2%, extending their year-to-date decline. Meanwhile, bank stocks including JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) were up as of Monday afternoon. (That trio is set to report tomorrow.)

David Solomon, chief of Goldman, said he expected companies to stick with their plans for dealmaking, even as initial public offerings stalled in the back end of the first three months of the year, per transcripts provided by AlphaSense. "There is no question that with the conflict in the Middle East, IPO activity slowed a little bit, particularly in March," he said in response to analyst questions during Goldman's conference call Monday morning.

"At the end of the day, equity markets have been extremely resilient," Solomon said. "And if that resilience continues, I do think you'll see IPO activity accelerate again."

Just as tariffs were top of mind during last year's first-quarter earnings season, Iran is likely to be a top topic over the next few weeks.

That the Iran War could derail a year of expected mega IPOs— offerings from Anthropic, OpenAI, and SpaceX are hotly anticipated—doesn't bode well for the banks, like Goldman, that underwrite them. Corporate executives, meanwhile, are monitoring the situation in the Middle East closely to figure out how they might be affected, according to Solomon.

"CEOs are looking carefully at how, what's going on, particularly with commodity prices translating into the economy and into consumer demand," he said.

Investors are likely to key into forecasts of companies most impacted by a surge in crude oil prices and the closure of the major trade passageway that is the Strait of Hormuz. "My guess is to the degree that energy prices remain high, you will see that translate through a little bit. But at this point, the underlying economy still remains relatively robust," he said.

Though the market appears to be anticipating a speedy end to the war in Iran, President Trump's recent move to launch a blockade on Iran ports in the Strait of Hormuz could extend the conflict by several months, according to some market experts. The longer the fighting goes, the likelier it will start to show up in company results in the second quarter and beyond.

"If the resolution of the conflict drags, that probably will be a headwind in some of these areas, particularly inflation trends as we get further into the second and third quarter," Solomon said.

Mergers and acquisitions activity has been "pretty resilient," Solomon said. "But of course, I don't have a crystal ball."

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