Sunday marks 100 days since the war in the Middle East began, with the conflict continuing to drive substantial volatility across all asset classes globally as a lasting peace deal remains elusive [1]. Negotiations between the U.S. and Iran have stagnated, with both sides sending mixed messages and periodically exchanging military attacks, though a fragile ceasefire is currently in place to allow for diplomacy [1].
In the immediate aftermath of the U.S. and Israel's initial strikes against Iran, global stocks sold off, but Wall Street's major averages have since rebounded, wiping out initial losses. The S&P 500 has reached new all-time highs, as investors look past the war, elevated oil prices, and inflation concerns [1]. According to Iain Barnes, chief investment officer at Netwealth, equity markets have been dominated by the assumption that the war could shift major energy-importing economies from a 'benign disinflationary environment' into stagflation. However, optimism over AI's disruptive potential and a profitable backdrop for U.S. companies have also fueled market gains [1].
Toni Meadows, head of investment at BRI Wealth Management, noted that spending on AI infrastructure has highlighted bottlenecks, particularly the demand for compute capacity, which is boosting semiconductor stocks. Markets and economies such as South Korea and Taiwan are receiving growth upgrades due to this trend [1]. Meadows also pointed out that the U.S., being largely self-sufficient in oil, is less immediately pressured by Gulf conflict. He cautioned that if the Strait of Hormuz remains closed, inflation is likely to rise, but investors currently believe neither Trump nor the Iranians want to prolong the conflict. He warned that if the conflict remains unresolved, demand destruction could eventually impact markets, though this point has not yet been reached [1].
Bond yields have spiked, reflecting ongoing volatility in government bonds as the war continues to influence financial markets [1]. European stocks have been more subdued, with rising energy costs posing greater challenges compared to the U.S. and Asian markets, which are seen as direct beneficiaries of AI spending [1].
CONCLUSION
Despite the ongoing Iran war and its ripple effects across global markets, Wall Street has rallied, with the S&P 500 hitting new highs. Investors remain optimistic about AI-driven growth and U.S. economic resilience, though risks from elevated oil prices and potential inflation persist. The market is currently led by select sectors, but unresolved conflict could eventually weigh on broader demand and sentiment.