Peace talk signals help steady risk appetite
The S&P 500 touched an intraday record high Wednesday, its first since the outbreak of the US-Iran war, as investors grew more hopeful about a potential de-escalation in the conflict and braced for a strong corporate earnings season, Reuters reported.
The milestone marked a significant shift in investor behaviour. Traders appeared more willing to set aside fears of severe conflict escalation, at least in the near term, as US president Donald Trump signalled that peace talks with Iran could soon resume and produce a deal, even after weekend negotiations in Islamabad fell apart.
The road back to record territory was not without turbulence. When hostilities erupted on Feb. 28, equity markets fell sharply, delivering a historic shock to global oil markets and renewing concerns about inflation and the future of US interest rates, according to Reuters. The S&P 500 slid as much as 9% after the conflict broke out, stopping short of confirming a correction. The Nasdaq Composite and the Dow Jones Industrial Average were not as fortunate – both confirmed a correction, a threshold typically defined as an index closing at least 10% below a recent record high.
Markets have since found firmer footing. Executives at major banks told investors that the U.S. consumer remained resilient despite the oil shock, and that the pipeline for deals and initial public offerings was robust, Reuters reported. Analysts now expect S&P 500 companies to earn a combined $605.1 billion in the first quarter, up from the $598.7 billion forecast at the start of the period, according to data compiled by LSEG.
A string of brokerages also seized on the selloff as a buying opportunity, moving to acquire equities at valuations made more attractive by the conflict’s toll on stock prices, Reuters reported.
Still, significant risks remain. Any renewed flare-up in the conflict could quickly test the market’s restored confidence. Pre-war anxieties, particularly concerns about disruption tied to artificial intelligence, could also re-emerge should geopolitical pressures ease, the wire service noted. Private credit firms, meanwhile, have been contending with redemption risk as some nervous investors continue to seek exits.
The record intraday high offered a moment of relief for markets battered by months of uncertainty. Whether that relief proves lasting will depend, in large part, on what happens next in the Middle East.
Charles Schwab analysts warned in an April 10 note that market volatility was likely to remain elevated, with key signposts including whether the ceasefire holds and how quickly traffic through the Strait of Hormuz can normalise. The firm currently views its moderate and severe scenarios as most likely – both of which project energy prices remaining elevated and lingering drag on global growth and inflation well into the second half of 2026.
