S&P 500 Recovers War-Induced Losses as Geopolitical Tensions Ease

The S&P 500 has erased all losses incurred during the onset of the conflict with Iran, signaling a return of investor confidence as geopolitical risks stabilize. The initial shock saw major indices plummet and oil prices surge past $100 per barrel following the closure of the Strait of Hormuz, a critical artery for one-fifth of global oil flows. Market sentiment has shifted toward optimism following the establishment of a fragile two-week ceasefire. While a long-term agreement remains elusive, comments from President Donald Trump suggesting the war is 'close to over' have mitigated fears of a prolonged engagement or an escalation into a larger ground war. Historical data supports this recovery pattern, as equity markets have frequently bounced back from war-induced volatility. Aside from World War II, the S&P 500 has typically posted positive returns three months after the start of major conflicts, including the Korean, Gulf, Iraq, and Afghanistan wars. Beyond geopolitics, robust corporate fundamentals are providing a strong floor for the market. Wall Street consensus estimates project S&P 500 earnings growth of over 16% for the first quarter of 2026, marking the highest growth rate observed in four years. This combination of easing tensions and high earnings expectations has encouraged long-term investors to maintain their positions. Despite the noise surrounding artificial intelligence and private credit, the underlying strength of corporate earnings continues to outweigh the immediate risks of regional instability.