Wall Street Rushes to Price Out War Damage as Stocks Hit Records

Article content

(Bloomberg) — Traders spent this week betting that the US conflict with Iran is all but over — driving stocks to records, dumping the dollar and pushing oil to around $90 a barrel.

Article content

A ceasefire between Israel and Hezbollah in Lebanon and Iran’s decision to reopen the Strait of Hormuz to commercial shipping sent risky assets surging anew on Friday, extending a rally that pushed the S&P 500 to a fresh record and fueling its biggest monthly advance since 2020.

Article content

Article content

Article content

President Donald Trump said Iran had agreed to suspend its nuclear program indefinitely and that a deal to end the war is mostly complete, with talks likely this weekend. Iran has yet to confirm any agreement.

Article content

Article content

Bank of America Corp.’s cross-market risk gauge, which measures turbulence priced across global equities, rates, currencies and commodities, is headed for its second-fastest monthly drop on record, with only the early pandemic recovery declining faster.

Article content

The S&P 500 took just three weeks to rally from its war low to an all-time high. The dollar on Friday briefly erased all of its war-fueled gains. Yet the damage from seven weeks of conflict will take far longer to undo. 

Article content

The Strait of Hormuz was closed for most of the conflict, crude prices are still materially higher than their pre-war levels, and global food supply chains that depend on the waterway remain disrupted. Inflation expectations have shifted and central banks have been forced to delay interest-rate cuts. And none of that reverses even if a peace deal is signed this weekend.

Article content

“The markets think that the most likely outcome is gradual de-escalation, but there are very fat tails. This is a legitimate inflation spike,” said Daniel Ivascyn, group chief investment officer at Pacific Investment Management Co.

Article content

Article content

Also fueling the rush: the fear of being left behind after the rebound in animal spirits witnessed last year when President Donald Trump walked back the fiercest of his global tariffs. Burned by that experience, traders are front-running a full recovery before the damage to supply chains, energy infrastructure and consumer confidence has begun to reverse. Commodity trading advisers who had been positioned short equities were forced to flip long and chase the rally.

Article content

The S&P 500 posted a third straight week of gains exceeding 3%. Global stocks also set all-time highs. The rebound from the late-March low to a record happened faster than any recovery of that magnitude, according to Asym 500’s Rocky Fishman.

Article content

The rally hasn’t been driven by peace optimism alone. Resiliency in the US economy, a stronger-than-expected earnings season and excitement around artificial intelligence demand have all provided independent momentum. S&P 500 earnings growth for 2026 has been revised up almost three percentage points, with profit momentum expected to build this year, according to Marcella Chow, a global market strategist at JPMorgan Asset Management.