Why the Stock Market Keeps Climbing Despite the U.S.-Iran War

CNBC reported Tuesday that the stock market rally now has concrete fundamental backing. That conclusion comes as the U.S.-Iran conflict enters its third month with no peace deal in sight.

The S&P 500 closed above 7,400 on Monday for the first time in its history. That milestone came even as oil prices remain well above pre-conflict levels. Critics say speculative excess is driving prices higher. The evidence, however, points to something more substantive.

A War That Has Barely Touched Corporate Earnings

When U.S. forces first struck Tehran on February 28, the S&P 500 fell roughly 8% at its worst point. That decline never even reached correction territory. Since then, the index has recovered approximately 17% from its March low near 6,300.

Oil prices have topped $120 per barrel at their peak and remain above $100. Pump prices have surged past $4.50 per gallon nationally and above $5 in several states. Yet most American companies appear largely insulated.

Research firm Trivariate reviewed 1,465 earnings transcripts filed since early March. It found that only around 10% of total U.S. equity market capitalization expects a negative or even mixed impact from the war. The firm noted that figure likely overstates the damage.

Background: How America’s Oil Dependence Has Shrunk

The U.S. economy is far less sensitive to oil price shocks than it was in prior decades. Energy costs now represent a relatively small input in overall company cost structures. That structural shift has blunted the traditional transmission channel between oil spikes and corporate margin compression.

Even if the Strait of Hormuz reopened tomorrow, analysts expect it would take weeks for additional supply to reach Western markets. Prices are unlikely to snap back to pre-conflict levels quickly, meaning businesses will manage higher input costs for some time yet.

AI and Mega-Cap Earnings Carry the Index

The second pillar of the rally is concentrated earnings power at the top of the market. Apollo’s chief economist Torsten Slok noted that the ten largest S&P 500 companies now generate roughly 34% of the index’s total profits. That share has doubled since 1996.

JPMorgan’s trading desk flagged last week that Magnificent Seven earnings are outpacing the remaining 493 S&P 500 constituents by more than 40%. That gap is the widest since 2014. Artificial intelligence investment continues to drive revenue growth for the largest tech names, providing a profit engine the war has not disrupted.

Trivariate flags consumer discretionary as the sector most at risk. Companies in that space are already flagging war-related pressure on spending. Certain software names with multiple compression year-to-date are also names the firm recommends investors avoid.

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