NEW YORK, May 27 (Reuters) - The benchmark Standard & Poor's 500 index will end 2026 slightly higher than its current record levels, according to a Reuters poll of stock market forecasters, who pointed to risks from higher energy prices and inflation if the Middle East war drags on.

The index will finish 2026 at 7,620, or 1.3% above its Tuesday close of 7,519.12, according to the median estimate of 47 market strategists, analysts and portfolio managers polled from May 15 to 26. They forecast that the benchmark index would reach 8,050 by mid-2027.

In February, a similar group forecast that the S&P 500 would end the year at 7,500.

Following a strong first-quarter U.S. earnings season and expectations of upbeat earnings for the rest of the year as well as hopes of some progress in talks to end the U.S.-Israel war with Iran, the S&P 500 has hit a series of record highs recently.

"We have strong AI secular tailwinds that were confirmed through the earnings we saw, and it helped stocks recover off the March lows," said Anthony Saglimbene, chief market strategist at Ameriprise.

"What's different now is we have higher energy prices, rates moving higher, and we are seeing inflation becoming more entrenched." He has a 7,500 year-end target on the S&P 500.

CORRECTION UNLIKELY

Talks to bring the war to a close have been complicated. Iran said on Tuesday the United States had violated a ceasefire by striking targets near the contested Strait of Hormuz.

War-driven inflation worries have pushed bond yields up sharply recently and are increasingly filtering into expectations for interest rates. Futures markets are now pricing in the potential for a rate hike by the Federal Reserve later in 2026.

At the start of this year, markets were banking on more equity-friendly rate cuts.

But nine of 13 respondents to an extra question in the poll said an S&P 500 correction in the next three months was unlikely while only four said it was likely.

In March, both the Nasdaq Composite and Dow Jones Industrial Average indices had corrections, falling at least 10% from respective all-time highs.

The poll forecasts the Dow will finish the year at 52,500. It closed Tuesday at 50,461.68.

EXPECTATIONS FOR STRONG EARNINGS

Strength in earnings and renewed optimism in the AI trade have allowed investors to some extent to look past surging oil prices, the war and other negative factors.

Chipmaker stocks are up sharply since the start of the year. An index of semiconductors has risen more than 80% since the end of December.

Last week, AI heavyweight Nvidia ( NVDA ) forecast second-quarter revenue above Wall Street estimates and announced an $80 billion share repurchase program. Its CEO, Jensen Huang, aimed to assure investors that the world's most valuable company can keep up its blockbuster growth.

Expectations for 2026 year-over-year S&P 500 earnings growth have leapt from 16% in early January to almost 25% last week, LSEG data showed. The last time annual profit growth was higher was in 2021, in the wake of the early fallout from the pandemic, according to Tajinder Dhillon, head of earnings research at LSEG.

"Whether or not the investment in AI ultimately pays off... most - if not all - major companies are racing to get ahead of, and better understand, the new technology, and that AI arms race will likely lead to higher prices in the short run," said Chris Zaccarelli, chief investment officer at Northlight Asset Management. He forecasts the S&P 500 will end the year at 8,300. 

(Other stories from the Reuters Q2 global stock markets poll package)