US airline stocks need earnings upgrades to sustain rally amid easing geopolitical tensions, says UBS.

US airline stocks have rallied recently due to optimism over resolving the Iran conflict and reopening the Strait of Hormuz, with the Jets ETF gaining 12% in three days. UBS warns that to maintain this rally, stronger earnings expectations are necessary as valuations are mostly fully priced. The firm highlights United Airlines and Alaska Air as having potential for further valuation gains, especially if demand remains stable and fuel costs stay low. Investors will likely focus on second-quarter earnings and company outlooks as geopolitical volatility fades.