Stock markets rally on earnings despite Iran war concerns
The S&P 500 and Nasdaq hit fresh all-time highs despite Trump rejecting Iran's ceasefire proposal and calling the truce "on life support".
Objective Facts
On May 10, the S&P 500 rose 0.3%, the Nasdaq Composite also gained 0.3%, and both indexes scored fresh all-time intraday highs. President Trump said on Monday the ceasefire with Iran is "on life support" and "unbelievably weak" after Tehran sent an "unacceptable" counter to Washington's proposal. Ed Yardeni told CNBC he raised his S&P 500 target to 8,250, citing "phenomenal" analyst earnings estimates he's "never seen anything like". With about 15% of S&P 500 companies having reported Q1 results exceeding expectations (including Citigroup, J.B. Hunt, and UnitedHealth), full-index earnings are projected to be roughly 14% higher year-over-year. Asian countries heavily reliant on Middle Eastern oil imports have seen their stock markets surge to record highs, with South Korea's Kospi and Taiwan's Taiex both hitting records and Japan's Nikkei 225 reaching record levels.
Left-Leaning Perspective
Left-leaning outlet Common Dreams emphasized consumer pain, citing the University of Michigan's Surveys of Consumers showing consumer sentiment at an all-time low driven by Iran war price increases, and noting that 30% of survey respondents said Trump's tariffs were driving up expenses. The Christian Science Monitor reported that in earnings calls U.S. corporations from McDonald's to Whirlpool warned about weakening consumer finances, with Kraft Heinz CEO Steve Cahillane telling Bloomberg that low-income consumers are "literally running out of money at the end of the month". US News reported that while most business respondents said their firms were seeing strong sales, only 13% expected profits to rise in the near future—"the lowest share it's seen since 2023"—contradicting the buoyant stock market mood. Common Dreams highlighted that Whirlpool CEO Marc Bitzer reported the appliance industry experienced a 7.4% drop in demand in Q1 2026, which he said was "similar to what we have observed during the global financial crisis". The Christian Science Monitor stated bluntly that "the U.S. war with Iran is looking increasingly like a loss, economically speaking, no matter what happens next," noting that "Iran has shown that it can bottle up as much as one-fifth of the world's oil with its control over the Strait of Hormuz". The outlet noted that rising fuel costs are disproportionately hitting low-income earners and the businesses that serve them, with corporations warning about weakening consumer finances in earnings calls. Leftist commentary conspicuously omits discussion of the strength of corporate earnings growth or the role of AI-driven momentum in the rally. Instead, it focuses on consumer hardship, wage inequality, and the disconnect between elite wealth and working-class pain, arguing that stock market records mask underlying economic deterioration for ordinary Americans.
Right-Leaning Perspective
Tyler Cowen, a prominent economist at George Mason University, argued in The Free Press that "economic fundamentals justify a rising market" despite the Iran war, claiming "the good news outweighs the bad" when looking at the global picture. CNN Business reported that Rick Gardner of RGA Investments credited "improving Iran headlines, investor exhaustion over the volatility in March and a strong start to earnings season," while Venu Krishna of Barclays expressed optimism about tech and AI, noting "extremely strong" momentum for earnings growth and spending on "AI and defense". ABC News reported that corporate earnings have proven resilient, with roughly 140 S&P 500 members beating analyst expectations at a rate 14% higher than a year ago. Mark Zandi at Moody's noted that AI and tech stocks "run on their own dynamic independent of anything, including the war," while consumer spending appears stable and companies benefit from GOP tax provisions that made it easier to write off investments upfront. Ivan Feinseth, market analyst at Tigress Financial, told ABC News his "outlook remains firmly bullish on U.S. stocks," pointing in part to the ongoing ceasefire. CNN Business noted that tech stocks rebounded after sliding earlier due to valuation concerns, with the tech rebound supporting the overall market rally. Right-leaning analysis emphasizes the legitimacy of record valuations based on earnings fundamentals, the transformative power of AI investment, and the resilience of consumer spending. This perspective downplays concerns about oil prices and geopolitical risk, treating market strength as justified by corporate performance rather than speculative euphoria.
Deep Dive
The stock market's resilience despite Iran war disruptions reveals a genuine tension between two economic realities. First, corporate earnings—particularly in technology, semiconductors, and AI infrastructure—are legitimately strong and growing. First-quarter earnings comfortably beat expectations, with consensus forecasts pointing to 38% tech sector earnings growth this year and 25% in 2027, thanks to AI. This is not mere speculation; major companies from Citigroup to GE Vernova are reporting real profit growth and expanding capex. Second, there is a sharp divergence in economic experience by income level. Research from the Federal Reserve of New York shows lower-income consumers are cutting spending while higher-income households maintain behavior, with households earning less than $40,000 reducing gas spending by the most during the March energy price spike. This K-shaped recovery is real and measurable. Both sides correctly identify their respective data points, but neither fully accounts for the other's reality. Right-leaning analysts focus on the aggregate earnings beat and AI tailwind, which are genuine. Left-leaning critics focus on consumer pain and demand weakness in discretionary sectors, which are also genuine. The market's record highs suggest investors believe the earnings-driven story will prove more durable than energy-shock disruptions, but Deutsche Bank warned of an "uncomfortable" comparison to 2022, when early S&P 500 gains over 10% in the Ukraine war's opening weeks gave way to a 25% decline from January peak to October trough, finishing the year down 19%. What to watch next: This week's Consumer Price Index and Producer Price Index reports will provide critical reads on how the Iran war's impacts are rippling into broader price pressures. If inflation surprises to the upside, the forward-looking earnings growth story becomes harder to sustain. Concurrently, Trump is expected to encourage China to pressure Iran into reaching a deal during his Beijing visit, where he will meet President Xi Jinping. Resolution of the Strait of Hormuz blockade would validate the market's bet on quick de-escalation and vindicate the "buy the dip" mentality. Failure would expose the market's complacency about tail risks—exactly as Deutsche Bank warned.
Regional Perspective
The main driver behind the record-breaking performance of Asian markets is the sustained momentum of the AI revolution, with the strong rise in South Korea and Taiwan driven by share prices of SK Hynix and Samsung (representing 44% of South Korea's market) and TSMC (accounting for 45% of Taiwan's market), all of which provide core infrastructure for AI development. Asian countries are heavily reliant on oil imports from the Middle East that have largely stalled since the Iran war, yet the hit to their economies hasn't stopped their stock markets from surging. Indian market analysts at Emkay Global retained their March 2027 Nifty target of 29,000, seeing earnings growth accelerating to 14% once the U.S.-Iran war ends, and said even if there's another false start, the war will end and Hormuz will reopen within weeks. India maintains significant energy interests in the Persian Gulf, relying on the region for nearly 60% of petroleum imports, with over 40% of its urea and phosphate sourced from the region, and following a drop in Qatar LNG output, India reduced production at three urea plants. Unlike the AI-driven rallies in Japan, South Korea, and Taiwan, India's market narrative centers on post-war recovery timing, reflecting the country's vulnerability to Strait of Hormuz disruptions. Regional media diverges sharply from Western framing on this story's angle. While U.S. and European outlets emphasize the paradox of record stocks amid war, Asian coverage treats the rally as logical given AI fundamentals driving Asian semiconductor leaders. The regional divide is geographic: countries with AI infrastructure exposure (South Korea, Taiwan, Japan) are hitting records, while oil-dependent economies without tech exposure (Europe, developing Asia) lag. Europe remains below pre-Iran war levels, dependent on Middle Eastern oil like Asia but with fewer tech and AI-focused companies compared to the United States and Asia, which is part of the reason the region's markets have yet to reclaim record highs.