Unresolved Conflict, Resilient Markets

After roughly two and a half months and a number of market updates, we still seem to be far away from a true resolution to the conflict in Iran. A ceasefire means little when the Strait of Hormuz remains blocked, inflation is increasing, and gas prices remain high.  However, while markets have certainly experienced volatility, the S&P 500 remains surprisingly resilient.

When the Iran conflict first escalated, markets initially reacted as expected. Investors worried about rising oil prices, supply-chain disruptions, and the possibility that the conflict could spread throughout the region. During the early phase of the conflict, the S&P 500 pulled back roughly 8% as volatility increased and energy prices moved sharply higher. However, once ceasefire discussions began and tensions appeared to stabilize, investor sentiment improved quickly. Since the ceasefire announcements, markets have recovered strongly and moved back toward record highs as investors became more confident that the conflict was unlikely to turn into a broader global crisis.

There are several reasons why the Iran situation has not caused a prolonged selloff in stocks (at least not yet). Corporate earnings have remained stronger than expected, helping support investor confidence despite geopolitical uncertainty. The U.S. economy is also far less dependent on Middle East oil than it was decades ago, reducing fears of a major economic disruption. Investors increasingly view geopolitical conflicts as temporary market disruptions rather than long-term economic threats, and artificial intelligence and technology-related growth continue to generate strong momentum for markets.  Federal Reserve policy, inflation trends, and broader economic growth expectations seem to be the bigger long-term drivers that investors are watching closely.

Another major development we are watching closely is President Trump’s visit to China and meetings with President Xi Jinping. Markets generally see the visit as a positive sign because both countries have strong economic incentives to improve communication and avoid additional trade tensions. The relationship between the U.S. and China impacts everything from manufacturing and technology to supply chains and global economic growth. Meaningful progress toward an improved partnership would likely be a boost for markets, while any deterioration could be a drag on them.

Overall, the market’s recent performance reflects cautious optimism. There are still real risks on the table, including inflation, geopolitical tensions, and interest rate uncertainty. But for now, investors appear focused on the strength of the economy, continued innovation, and the belief that many of these challenges can be managed without derailing long-term growth.

I promised myself I’d keep this update focused, and I almost did, but I cannot close without some type of sports reference. While UGA football did not bring home a championship, and both UGA basketball and the Hawks flamed out in historic fashion in their respective postseasons, I am starting to get optimistic about the Atlanta Braves. Even without being completely healthy, the Braves currently own one of the best baseball records. It should be a fun summer for all of us in Braves Country.

Will

Disclosure: Persium Advisors, LLC is a SEC-registered investment adviser. The opinions in the preceding commentary are as of the date of publication and are subject to change. Information has been obtained from third-party sources we consider reliable, but we do not guarantee the facts cited are accurate or complete. This material is not intended to be relied upon as a forecast or investment advice regarding a particular investment or the markets in general, nor is it intended to predict or depict the performance of any investment. Investors should consult their financial advisor on the strategy best for them. Past performance is no guarantee of future results.