Equities: Lack of Visibility, Scenarios… and Opportunities

The Casablanca Stock Exchange continues to evolve in line with developments in the international context, particularly those related to the war in the Middle East. From the outbreak of the conflict, the market was shaken by panic, reflected in two consecutive declines of 4.2% and 5.6%.

These drops were followed by slight rebounds, then by volatility, with no clear trend emerging. Since the beginning of the year, the MASI has recorded an underperformance of 6.7%.

It is important to note that, up to the date of the conflict, the index had already fallen by 3.75%, and that from the outbreak of tensions until March 26, it reversed this trend, as the initial panic gradually subsided, allowing the index to recover 1.2%.

It is clear that the equity market is not directly exposed to international tensions. Nevertheless, it is affected indirectly, particularly through oil price volatility, which could impact several economic sectors with a possible return of inflation. Analysts’ projections and scenarios therefore depend closely on the duration and scale of the U.S.-Israeli-Iranian conflict.

Three possible scenarios

If the parties reach a compromise within a very short timeframe—around one month—analysts expect a significant rebound, supported both by easing oil prices and the gradual return of investors’ risk appetite. However, this would likely be preceded by a 10% decline, reflecting a reassessment of risk premiums.

Following this, the stock market should gradually recover, driven by the extremely positive results reported by listed companies at the end of 2025. These solid results would provide an additional boost to the market, potentially enabling it to achieve double-digit performance by year-end.

“With a P/E ratio of 19x estimated for 2026, results that are in line with expectations so far, and a return to normal in the international context, the equity market should, without much difficulty, close the year with gains ranging between 10% and 12%,” explains the head of research at a brokerage firm.

If the conflict were to last between six and twelve months, volatility would increase and energy prices would rise. The general market index would then be expected to decline within a range of -10% to -15%. Investors, for their part, would likely favor defensive stocks.

Over the longer term, a major oil shock would inevitably occur. This would likely lead to a more severe market decline, ranging between -15% and -20%, erasing almost all of last year’s performance. “The rise in imported inflation, caused by the inevitable increase in the price of crude oil and its derivatives, will directly impact industrial input costs and will be passed on to the end consumer.

This situation will lead to a decrease in purchasing power and a reallocation of assets toward less risky products, while forcing a downward revision of listed companies’ outlooks,” the director explains.

Second half to watch closely

It should be noted that the bulk of listed companies’ business volume over the past three to four years has been generated in the second half of the year, with the first half traditionally being calmer, as activity slows during this period due to rainfall, but also because Ramadan and religious holidays have shifted to the first half of the year.

Companies are therefore likely to feel the impact of the conflict and rising prices more strongly in the second half than in the first, with higher production costs, pressure on margins, and, in some cases, increased debt.

To preserve their margins, companies generally pass on cost increases to consumers. “Even if oil reaches $150 per barrel, companies are expected to fully, though gradually, pass on the entire increase to selling prices,” our source notes.

However, a decline in inflation, combined with selling prices that are not automatically revised downward, could allow companies to consolidate their margins and maintain stable profitability.

Attractive valuations

Over the longer term, a significant recovery in the equity market is expected starting in 2027, with the gradual return of investors, whether individual or institutional.

These investors should be attracted by more favorable prospects for listed companies, as well as by a more predictable economic environment. All of these factors could mark the beginning of a sustained recovery phase after a period marked by volatility and geopolitical uncertainty.

As every crisis brings its share of opportunities, the current one represents a window of opportunity for several listed stocks. With an average P/E of 19, market valuation is in the lower range of its historical average, thus providing multiple entry points for investors with a higher risk tolerance.

In these conditions, the banking sector is among the most attractive, with a P/E of 12x, alongside telecommunications at 13x, and Alliances Développement Immobilier, which remains fairly valued with a P/E of 15x. The construction and public works sector (BTP) remains overvalued with a P/E of 23x, as do the agri-food and transport sectors. In any case, investors capable of absorbing volatility should fully benefit from these valuation levels.

Economic growth: Between 0.4 and 1 percentage point lower in 2026
Economic growth is expected to be around 4.7% in 2026, supported by an agricultural recovery, strong public investment, and the resilience of the services sector.

That said, with oil prices rising above $85 per barrel, this could weigh on economic activity, given that the assumptions of the 2026 Finance Law were based on a price of $65 per barrel. BMCE Capital Global Research (BKGR) estimates that growth could be reduced by around 0.4 percentage points, due to higher energy costs, more expensive imported inputs, and a possible weakening of domestic demand.

Inflation, initially projected at around 1.3%, could reach nearly 2% in 2026, reflecting a moderate rise in imported inflation in the event of temporary disruptions in the Strait of Hormuz. In the case of a prolonged conflict, growth would decrease by one percentage point, while inflation would range between 3% and 4%.