Core Viewpoint - The RBC Capital Markets report indicates that escalating geopolitical tensions in the Middle East could lead to a significant drop in the S&P 500 index, with a potential decline of 20% if oil prices surge and inflation rises in the U.S. [1][5] Group 1: Market Impact - The S&P 500 index could fall to 4,800 points in a "severe" scenario, representing a nearly 20% drop from current levels, while a less severe situation might see it drop to around 5,200 points [1][5] - As of last week, the S&P 500 index closed at 5,976.97 points [1] - The report highlights that the longer and broader the military conflict in the Middle East, the greater the negative impact on the U.S. stock market [1] Group 2: Economic Concerns - The geopolitical conflict may raise concerns about consumer health, the broader economic situation, and the Federal Reserve's policy path, potentially leading to selling pressure on stock prices [2] - In a scenario where U.S. inflation rises to 4% and corporate earnings show zero growth, the S&P 500 index is expected to hover around 4,800 points by year-end [5] Group 3: Earnings Outlook - In a less severe inflation scenario, U.S. stock earnings are projected to grow by 7% year-on-year, with the S&P 500 index expected to be around 5,200 points by year-end [5] - RBC sets a year-end target for the S&P 500 index at 5,730 points, approximately 4% lower than the current level [5]