Global Equities Poised for Recovery as Iran Ceasefire Eases Geopolitical Risk

The recent ceasefire in the Iran war has provided a significant boost to global equity markets, with the S&P 500 and Nasdaq-100 reaching new all-time highs. The resolution of hostilities is expected to stabilize global valuations that were previously disrupted by conflict-driven volatility and energy supply fears. Prior to the outbreak of war on February 28, international stocks—tracked by the FTSE Global All Cap ex-US Index—had largely outperformed U.S. equities. The conflict, particularly the closure of the Strait of Hormuz, severely impacted energy-dependent economies. Japan's Nikkei 225, for instance, plummeted 13% between February 27 and March 31 before rebounding by over 14% following the ceasefire news. Investors are now eyeing low-cost vehicles like the Vanguard Total International Stock ETF (VXUS) to gain broad exposure. VXUS, which holds 8,794 stocks with significant weightings in Japan (15.3%) and the UK (9%), currently trades at a P/E ratio of 18.4, significantly lower than the S&P 500's 30.6. The fund has delivered an impressive 36.6% return over the past year. For those seeking yield, the Vanguard International High Dividend Yield ETF (VYMI) offers a more concentrated approach with a P/E of 14.56 and a strong track record, including a 37.1% return over the past year. Additionally, the State Street SPDR Portfolio Emerging Markets ETF (SPEM) provides exposure to developing economies for investors with a higher risk tolerance. The current shift suggests a rotation back toward international markets as the 'war discount' fades and economic growth resumes without the immediate threat of systemic energy disruptions.