Global stocks experienced a significant rebound, with the S&P 500 reaching a fresh record and extending its biggest weekly advance since 2020. The Dow Jones Industrial Average was up 1.8%, and the Nasdaq saw its longest positive streak since 1992. This rally was largely fueled by speculation that the conflict in Iran, which had been ongoing for two weeks, could be nearing its end. Analysts noted that the market was "very happy to price in the offramp to appease rather than peace itself," suggesting that the mere prospect of peace was enough to drive investor confidence.
In conjunction with the stock market surge, oil prices plummeted, reversing earlier war-driven gains. Brent crude, which had previously topped $100 per barrel, fell to around $90 a barrel, a decrease of 9%, while West Texas Intermediate (WTI) dropped 12% to $83. The dollar also experienced volatility, briefly erasing all of its war-fueled gains. Federal Reserve Governor Christopher Waller expressed caution regarding lowering interest rates due to the energy shock caused by the war, despite underlying inflation moving towards 2% when abstracting from tariffs and energy effects.
The market's optimistic outlook was further supported by strong earnings expectations. Many bulls noted that earnings looked positive, and expectations for future earnings had increased. The week ahead was anticipated to be busy with earnings reports from various companies, including defense stocks, Tesla, Intel, and United Airlines. Despite the rally, some analysts questioned its sustainability, especially given that markets were already at all-time highs and unexpected developments could lead to a pullback. The S&P also posted its biggest monthly advance since 2020, with a third consecutive week of gains.
