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A few days after the United States and Israel attacked Iran, Anthony Reid (30) decided to set aside part of his savings to buy stocks. He had hesitated before, weighing the risk that an energy supply disruption could push inflation higher and pressure the stock market. Still, he bought shares, betting that the timing could be favorable when others are fearful.
Since the conflict began, all three major U.S. stock indices have risen. The S&P 500 and Nasdaq Composite have recently reached new highs, and a group of large technology stocks added an additional $2.5 trillion in market value over eight sessions. Allbirds, a footwear company that had been popular with tech enthusiasts in the 2010s, surged nearly 600% in a single day after pivoting to artificial intelligence (AI).
Despite the rally, investors continue to face concerns tied to the conflict. Oil tankers still cannot move freely through the Hormuz Strait, and peace talks between the U.S. and Iran remain postponed. On April 21, President Donald Trump said he would extend the ceasefire but would keep Iran’s ports blocked.
Analysts say the market’s upward momentum is increasingly driven by high-risk positioning and trend-following strategies. They argue this can cause asset prices to detach from underlying fundamentals or, at least, to discount negative developments.
Reuters, citing LSEG/Lipper data, reported that global investors have bought a net $28 billion of U.S. stocks since the ceasefire declaration. Of that total, U.S. investors contributed nearly $23 billion.
Seasoned investors say the rally has reinforced the idea of staying invested despite volatility. They point to the view that near-term risks are relatively limited compared with the broader U.S. economy, which has absorbed multiple shocks in recent years. They also note that large oil and gas production helps reduce the impact of energy disruptions.
The rebound also reflects a “bottom-fishing” approach that previously supported markets during the pandemic and during tariff-driven volatility last year. Four of the five strongest S&P 500 sessions this year occurred during the period of conflict.
Even with the rally, analysts warn that the strategy of buying after declines is risky. They expect energy prices to remain elevated this year even if the conflict ends and ships can move freely in the Persian Gulf. Geopolitical and energy shocks could continue to weigh on markets.
“We cannot predict whether that will happen. But clearly the market isn’t worried about it,” said Matthew McLennan, portfolio manager at First Eagle Investments.
Some market participants attribute the latest advance mainly to technical trading. Hedge funds reportedly bought to cover shorts as volatility rose, helping extend the move.
“Six weeks ago was a clear example of how emotion and herd behavior can create sharp swings. But rallies based on technicals also have limits. When investors focus on fundamentals, the rally becomes sustainable,” said Mark Hackett, market strategist at Nationwide.
Others say investor behavior has changed. Alonso Munoz, Chief Investment Officer at Hamilton Capital Partners, said his clients are less concerned about volatility now. He added that when the market fell late in March, his phone “hardly rang,” suggesting investors have become more accustomed to large declines.
For some investors, a drop is viewed as an opportunity. Reid said that after declines for most of March, his Robinhood shares rose 31% in a week, and he plans to add more if the market falls further.
Another investor, Danner Drake (54), said he acted when the Nasdaq entered correction territory on March 26. He sold 10% of an index fund and shifted into a fund with higher potential returns. Drake said his approach has been consistent across major downturns, including the dot-com bubble and the 2007–2009 financial crisis.
“Why the market falls doesn’t matter, whether it’s the Middle East conflict, a pandemic, or anything else. When the market falls, I buy,” Drake concluded.
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