S&P 500 and Nasdaq reach record highs despite Iran tensions
S&P 500 and Nasdaq hit record highs despite stalled U.S.-Iran peace talks, as investors shrug off geopolitical risks to focus on strong corporate earnings and AI momentum.
Objective Facts
The S&P 500 added 0.12% and closed at a record level of 7,173.91, while the Nasdaq Composite gained 0.20% and notched a closing record of 24,887.10, with both indexes reaching new all-time highs in the session. The market's gains were kept in check as peace talks between the U.S. and Iran appeared to come to a standstill, after President Donald Trump canceled plans to send U.S. special envoy Steve Witkoff and Jared Kushner to Pakistan to discuss the ceasefire in Iran, saying in a Truth Social post that negotiations could happen over the phone. Asia-Pacific markets mostly rose Monday as Iran reportedly offered a new proposal to the U.S. for reopening the Strait of Hormuz and ending the war while suggesting that nuclear talks be deferred. Investors are leaning in to optimism about US corporate earnings season and betting that the oil shock won't last long enough to severely hinder economic growth, with Wall Street in the midst of earnings season where nearly a fifth of companies in the S&P 500 have reported quarterly earnings and 86% beat expectations for earnings per share.
Left-Leaning Perspective
Kristina Hooper, chief market strategist at investment firm Man Group, expressed skepticism about record highs, stating there is "a very optimistic bias in markets that hasn't fully priced in the issues surrounding this conflict in the Middle East." Pierre-Olivier Gourinchas, director of research at the International Monetary Fund, warned that "Despite the recent news of a temporary ceasefire, some damage is already done, and the downside risks remain elevated," cautioning that a protracted conflict risks deep and global economic pain. JPMorgan CEO Jamie Dimon called gradually rising inflation and interest rates "the skunk at the party" that could crash stocks, warning that the war increases the risk for significant and persistent oil and commodity price shocks, could alter global supply chains similar to the pandemic aftermath, and could trigger another round of sticky inflation and surging interest rates from central banks. Naked Capitalism commentary emphasized that President Trump deeply cares about the stock market, and markets are not properly pricing risk because they assume the U.S. government will not allow them to implode, putting the world economy at stake. The piece noted that inflation is hitting U.S. shores with more to come, but the impact of the Iran War will take time to work through the global economy as many companies still have stockpiles of critical chemicals and materials acting as buffers to immediate price shocks. The article criticized market complacency, suggesting that while geopolitical turmoil continues, the stock market remains resilient only because investors believe the government will ultimately rescue it—a precarious foundation for confidence. Some experts expressed concern that markets could be getting ahead of themselves, with analysts at ING saying "Markets are increasingly pre-empting a positive outcome as the U.S. and Iran prepare for a new round of talks." The left's framing emphasizes that record highs lack a solid foundation when the underlying conflict remains unresolved, inflation threats persist, and oil prices remain elevated.
Right-Leaning Perspective
CNBC's Jim Cramer argued that Wall Street's resilience shows investors are focusing on interest rates rather than the Iran war, the true driver of stock valuations, and that interest rates and their impact on stock valuations, not geopolitics, remain the primary driver of share prices. Cramer noted that interest rates on government bonds rolled over after initially jumping in response to the Iran attacks, that dynamic allowed investors to continue paying higher valuations for stocks even as geopolitical risks persist, with the benchmark 10-year Treasury yield topping out on March 27 and the S&P 500's lowest close coming on March 30. Cramer concluded that "I think I've been negligent in bringing up the power of low rates, because it's the reason the bulls keep winning when it seems like they should be slaughtered," saying "If interest rates were spiking, this market would be very different." Venu Krishna, head of US equity strategy at Barclays, said he is optimistic about tech and AI with positive signs for the broader market, noting the underpinnings for the rally include spending on AI and defense with "extremely strong" momentum for earnings growth in the U.S., and that "Oil moving around at these levels at this point is not derailing that momentum," with market valuations currently looking "quite attractive." Wedbush analyst Dan Ives told Fortune that the Iran conflict has created opportunities for traders, writing "We continue to strongly believe the nervous geopolitical backdrop over the past few months has created an oversold tech environment for Mag 7, software names, and many tech winners in the AI revolution." J.P. Morgan analysis noted that powerful earnings growth reinforces that the rebound is not a knee-jerk rally but a durable reflection of strength in the tech sector and the broader index. Right-leaning and market-optimistic commentators frame the record highs as fundamentally justified by strong corporate earnings, AI momentum, and accommodative monetary policy rather than by geopolitical developments.
Deep Dive
The story's specific angle concerns investor behavior: why markets are hitting record highs despite an unresolved military conflict, blocked global oil supply chokepoint, and elevated inflation risks. The broader economic fundamentals provide the legitimate basis for market resilience. Strong earnings buttress stocks against volatile Iran news, with earnings growth expectations for Q1 standing at 16.1 percent, up from 14.4 percent at the start of April. Tech, the best performing sector this month, is estimated to account for 60% of earnings growth this year. This is the foundation both sides acknowledge. The disagreement is structural. Left-leaning critics argue the market is extrapolating current earnings optimism while ignoring how a prolonged conflict affects costs, inflation, and future profitability. They emphasize tail risks: Mark Zandi at Moody's warned that if investors are incorrect about Trump backing down quickly, the stock market may see a "full-blown correction" or worse. Right-aligned strategists argue the market rationally discounts future conditions, pricing in either rapid conflict resolution or structural insulation from oil shocks. The interest rate framework is critical: Cramer noted that interest rates rolled over after initially jumping, allowing valuations to hold steady, with the 10-year Treasury yield peaking March 27 and the S&P 500's low coming March 30, suggesting bond markets are pricing stability and modest inflation expectations. What comes next depends on three variables: (1) Whether Iran negotiations produce a durable ceasefire or escalate again; (2) Whether the inflation embedded in oil prices persists into broader price pressures or remains contained; and (3) Whether AI capex spending delivers promised returns or reveals overcapacity. Iran's reported proposal to reopen the Strait while deferring nuclear negotiations suggests negotiating space exists, but Iran's Foreign Ministry spokesperson said no meetings are currently planned between Tehran and Washington, making near-term resolution uncertain. Markets are betting resolution occurs before inflation expectations shift or earnings surprise downward.