Wall Street sets records as Iran war persists and profits stay strong

In New York, the logic driving Wall Street’s latest advance has seemed counterintuitive to many investors: U.S. stocks have been setting records even as the Iran war continues, gasoline stays expensive and households report less confidence in the economy.

But as the conflict has unfolded, market pricing has increasingly returned to a narrower question—how much money companies are making and how much investors are willing to pay for each dollar of that profit—rather than to war headlines alone. That shift has helped the S&P 500 recover from earlier swings, including a selloff last month when the index fell nearly 10% below its prior record, only to later climb back above it.

Part of the story has been the way investors have moved between fear and less fear as the war risk has translated into energy and inflation expectations. In the early days of the conflict, stock prices dropped as worries grew about a longer-term rise in oil prices that could feed inflation across the global economy.

Interest-rate expectations also weighed on equities. The AP account described investors as concerned that the threat of high inflation would limit the Federal Reserve and other central banks from cutting the short-term rates they control—rates that can support growth but can also worsen inflation if they are not adjusted appropriately.

Since late March, expectations have built that the United States and Iran could avoid a worst-case scenario for the global economy, and a ceasefire agreed earlier this month was described as still holding, though “tenuous.” The easing of that fear has also shown up in oil prices, with Brent crude falling from roughly $119 during the worst of the market’s worries to levels around $100 by Wednesday.

Markets have focused closely on the Strait of Hormuz, a key route for oil tankers leaving the Persian Gulf. The AP story said traders weigh what happens if Iran keeps the strait closed and if the U.S. Navy continues to blockade Iranian ships, because that combination would disrupt supplies and also affect Iran’s oil revenue.

Thierry Wizman, a strategist at Macquarie Group, was quoted explaining how traders can interpret the economic war. “By denying Iran its oil-related revenue, traders may be thinking that the economic war may be more effective in getting concessions from Iran than was the kinetic war only, and that this will end the war sooner, rather than later,” he said, according to the AP account.

As fear has eased, investors have also been able to concentrate on the first part of the stock-pricing equation: profits. The AP report said a little more than 15% of S&P 500 companies have already reported their first-quarter results, and the vast majority topped analysts’ expectations, citing examples that range from Citigroup to J.B. Hunt Transport Services to UnitedHealth Group.

FactSet data, as cited by AP, suggested that if the remaining companies in the index simply match analysts’ estimates, earnings for S&P 500 companies would end up about 14% higher than a year earlier. That comes with a caveat: the AP account noted that company guidance still reflected war-related concerns, even as the earnings picture so far showed few clear signs of being dragged down by the fighting.

Looking ahead, analysts have raised their expectations for S&P 500 profits since the war began. The AP story said forecasts call for growth in S&P 500 profits to accelerate to 20% in the second quarter, and it pointed to continuing support from corporate outlooks, including Delta Air Lines’ comments about strong travel demand, PepsiCo’s decision to stick with its profit forecast for 2026 and CEO Ramon Laguarta’s remarks, and GE Vernova’s raised revenue outlook for the year amid demand for power for AI data centers.

Even with the record close, the AP story emphasized that the market could reverse quickly if conditions worsen. It said Wall Street’s mood could swing back toward fear if U.S.-Iran talks break down and if oil markets appear to be facing shortages; it also said that if oil prices stay high for long enough, they could erode corporate profits while weakening customers’ spending power.

The AP account did not treat the current rise as a guarantee that the war risk has faded; instead, it portrayed the record rally as a temporary re-weighting—away from immediate fear about inflation and toward an earnings stream investors have so far found resilient. MSI previously reported similar dynamics as oil eased and earnings beats helped extend the advance.