The S&P 500 has returned to its level from before the Iran-related conflict began, as investors bet that the war will not last long and global markets will recover quickly.
Despite major changes in the global economy, including higher oil prices, rising bond yields, and expectations of fewer interest rate cuts, the US stock market has remained strong.
Oil prices have increased by around 40% since the conflict started, while concerns about inflation have pushed government bond yields higher. These factors usually put pressure on stock markets.
However, investors say the market is being supported by strong company earnings and confidence that the conflict will not escalate into a long-term global crisis.
Market Bets on Short Conflict
Analysts say much of the market recovery is based on the belief that the conflict will be temporary and a diplomatic solution will be reached.
Brad Conger, chief investment officer at Hirtle Callaghan, said investors may be too optimistic about how quickly the situation can be resolved.
He warned that current stock prices may not fully reflect the risks of higher inflation and energy costs if the conflict continues.
Strong Corporate Earnings Support Stocks
Despite global tensions, US companies continue to show strong profit forecasts. This has helped support investor confidence and pushed stock prices higher.
The stock market also continues to benefit from a long-running bull market, with many investors trying not to miss further gains.
Oil Prices Seen as Temporary Pressure
Angelo Kourkafas, a strategist at Edward Jones, said oil prices are a key factor for markets.
He explained that while oil prices are currently high, futures markets suggest they may fall later in the year if the conflict eases.
This shows that investors expect energy disruptions to be short-term rather than permanent.
Outlook Remains Uncertain
S&P 500 has recovered after briefly falling in the early weeks of the conflict and is now close to record levels again.
However, analysts warn that markets could become more volatile if tensions rise again or if oil prices remain high for longer than expected.
For now, investors appear confident that the global economy will remain stable, but uncertainty continues to hang over financial markets.
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