Wall Street sets records as Iran war cools inflation fears and boosts profits

In the middle of a war with Iran, U.S. stocks have kept climbing—an outcome that can look counterintuitive for household concerns about gasoline prices, economic confidence, and the broader conflict. But Wall Street has continued to price the market largely around the same core question: how much money companies are making and how much investors are willing to pay for each $1 of ownership in U.S. businesses. On Wednesday, that focus helped drive the benchmark S&P 500 to close at a record 7,137.90, extending gains that followed a prior selloff.

Early in the war, anxiety helped push markets down, according to the AP’s description of the drivers. The worry centered on the possibility of a prolonged surge in oil prices that could trigger a broader inflation shock across the global economy. At the same time, interest-rate expectations moved against stocks: the rise in rates reflected investors’ concern that higher inflation would make it harder for the Federal Reserve and other central banks to cut the short-term rates they control, even as lower rates can support the economy.

Those pressures began easing in late March as expectations built that the United States and Iran would avoid a worst-case global scenario. The ceasefire that the two sides agreed to earlier this month remained in place, though described as tenuous, and that shift in the perceived macro path fed into investor sentiment. The AP also linked the change in market mood to oil prices, noting that Brent crude—used as a benchmark internationally—had dropped from roughly $119 at the height of the worries to around $100 by Wednesday.

Oil markets have remained tightly connected to the Strait of Hormuz and the supply risk tied to it. The AP said the focus has been on whether Iran keeps the strait closed and whether the U.S. Navy continues to blockade Iranian ships, a combination that could disrupt shipments and revenues for Iran while leaving customers without oil. In that context, Thierry Wizman, a strategist at Macquarie Group, was quoted describing how traders may be weighing the “economic war” created by denying Iran oil-related revenue, including the view that it could produce concessions sooner than kinetic conflict.

The AP also described renewed interest-rate trading assumptions as part of the shift away from fear. Wall Street traders, it said, began betting again on the chance that the Fed could resume interest-rate cuts later this year, though the probability was described as lower than it had been before the war. Even with that uncertainty, the AP’s account suggested investors were less concerned about the possibility of rate hikes than they had been earlier in the conflict.

As those fears cooled, investors returned to the earnings side of the valuation equation—where corporate profit strength has provided support. The AP reported that a little more than 15% of S&P 500 companies had already reported profits for the first three months of 2026, and that “the vast majority” topped analysts’ expectations. It cited examples spanning financials and transportation to health care, including Citigroup, J.B. Hunt Transport Services and UnitedHealth Group.

If the rest of the index’s companies simply match analysts’ estimates, the AP said FactSet projects that S&P 500 earnings would end up roughly 14% higher than a year earlier. The AP added that those results include a month of wartime conditions, and that companies have described war-related risks while still not showing many signs, in their reporting, of those risks hurting earnings.

In addition, the AP said corporate outlook expectations have firmed even as the ceasefire remains uncertain. Analysts, it reported, have raised their expectations for second-quarter S&P 500 profit growth toward 20%, and companies have offered fewer signals that would force those forecasts down. The AP cited comments tied to specific companies’ demand or outlook statements, including Delta Air Lines’ view of strong travel demand, PepsiCo’s decision to stick with a profit forecast over 2026 that it initially gave before the Iran war began, and GE Vernova’s raised revenue forecast for the year amid demand for power from AI data centers.

Even with the record close, the AP said “all is still not clear,” and outlined how the market could reverse if the ceasefire falters. The AP warned that Wall Street could quickly swing back toward fear if U.S.-Iran talks break down and the oil market again looks to face shortages. It also said that if oil stays high long enough, it could erode some of those profits by raising business costs and weakening spending power for U.S. households and other customers.