Middle East-inflicted economic damage will be contained due to strong Q2 earnings – economist

BNP Paribas economist Isabelle Mateos y Lago says strong Q2 earnings and upward revisions to earnings expectations signal markets expect the economic fallout from the Middle East conflict to be contained. Investors are sticking with structural themes—AI, supply-chain shifts and defense spending—supporting resilience in U.S. markets (tech-heavy and a net energy exporter) while Germany’s energy-sensitive DAX lags. A weaker safe-haven bid for U.S. Treasuries and the dollar is prompting diversification into European and emerging-market assets. Overall, the piece frames Q2 corporate results as the key driver limiting broader market downside despite geopolitical risk.