US Equities Surge to Record Highs Despite Escalating Iran Conflict and Oil Shock

US equity markets demonstrated remarkable resilience in April, with the S&P 500 recording its strongest monthly performance in nearly six years. The index climbed more than 10%, reaching seven new record highs, while the tech-heavy Nasdaq surged 15%. This recovery was fueled by robust corporate earnings and continued investor enthusiasm for the artificial intelligence boom, which effectively overshadowed geopolitical instability. This rally occurred despite a severe energy crisis. The ongoing conflict with Iran and the effective closure of the Strait of Hormuz—a critical artery for global crude oil—have triggered a sharp spike in energy costs. Brent crude reached a war-high of $126 per barrel before settling near $114, representing a more than 50% increase since the onset of hostilities. US average gasoline prices have consequently hit $4.30 per gallon, the highest level since 2022. The energy shock has flowed directly into the bond market, pushing the 10-year Treasury yield to 4.4%, its highest level since March. This rise in yields has increased borrowing costs across the economy, with 30-year fixed mortgage rates climbing to 6.3%. Market participants are now adjusting to a 'higher-for-longer' interest rate environment. Following the Federal Reserve's decision to hold rates steady, traders now expect the central bank to remain on hold until 2027. While corporate fundamental strength currently offsets the risks of inflation and growth hits, the prolonged closure of the Strait of Hormuz remains a primary systemic risk.