Why the S&P 500 Is Hitting All-Time Highs Despite the U.S.-Iran War

CNBC reported Tuesday that the S&P 500 record high above 7,400 has left many investors puzzled. The benchmark index closed at an all-time peak Monday. That came despite oil topping $100 a barrel and a U.S.-Iran military conflict now entering its third month.

The Drawdown That Never Came

When U.S. forces first struck Tehran on February 28, the S&P 500 fell roughly 8% from peak to trough. That did not even qualify as a formal correction, which requires a decline exceeding 10%. Since then, the index has recovered around 17% from its March low near 6,300. The rebound has been swift and, to many observers, surprising. Gas prices have climbed above $4.50 a gallon nationally and above $5 in several states. Oil briefly exceeded $120 a barrel before pulling back. Yet equities have shrugged off those headwinds.

Also Read: Fed Holds Rates Steady Amid Inflation and Trade Uncertainty

Why Most Companies Are Not Feeling the Pain

A key reason for the resilience is that oil simply matters less to corporate America than it once did. CNBC cited a Trivariate Research review of nearly 1,500 earnings transcripts filed since early March. The firm found that only around 10% of the total U.S. equity market cap expects a negative or meaningfully mixed impact from the conflict. Trivariate noted that even that figure likely overstates the damage. The consumer discretionary sector is an exception. Several companies there have already flagged pressure on household spending. Certain software names with compressed multiples are also flagged as vulnerable, according to the research.

Also Read: Oil Markets Brace for Prolonged Strait of Hormuz Disruption

AI and Mega-Cap Earnings Are Carrying the Index

The second and third pillars of the rally come from the top of the market. Apollo 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. Meanwhile, JPMorgan’s trading desk estimated last week that the Magnificent Seven technology companies are outearning the remaining 493 index members by more than 40%. That gap is the widest since 2014. Artificial intelligence investment continues to fuel top-line growth at those firms, insulating them from the energy disruption hitting other parts of the economy.

The combined effect is an index that can weather a genuine geopolitical shock because its heaviest earners face minimal oil exposure.

Read Next: What the Strait of Hormuz Blockade Means for Global Supply Chains