US stocks are heading back toward all-time highs, and the stock market’s message appears to be that all is fine. The Iran war? It will be over soon, investors say. The global energy price shock? Transitory. No Federal Reserve interest rate cuts? Not a problem. A tiny number of artificial intelligence companies potentially upending entire industries and the jobs market? Same. That’s not to mention the unknowns of the private credit selloff, backlash against the data center buildout, and a ballooning federal budget deficit.

Despite these challenges, the stock market has recovered all of its losses suffered in the early weeks of the war. The S&P hit an all-time closing high of 7,022.95 on Wednesday, outshining its previous high of6978.6, set on Jan. 28. The index is up 2.59% year to date and 30.14% over the past 12 months. The Morningstar US Market Index also hit a new all-time high of 17,076.76.

Analysts and investors credit robust earnings, decent valuations, and expectations that the conflict will be resolved soon. “While we expect there to be ongoing geopolitical risks, people are looking at earnings,” explains Ann Miletti, head of equities at Allspring Global Investments. By that measure, “in some ways, the market’s becoming healthier and getting broader.”

Concerns about war impact fade

When the war began on Feb. 28, the ensuing oil price shock sent stocks lower, with the market seesawing on headlines reflecting escalation or the promise of resolution. By March 30, the S&P 500 was down 7.8% from before the war as US President Donald Trump threatened to attack Iranian oil wells and power plants.

With shipping traffic in the Strait of Hormuz shut down and significant damage done to key energy and other industrial infrastructure in the region, economists are raising inflation forecasts and cutting growth expectations. The oil price shock is expected to ripple through to food costs, and the war could impact semiconductor production. Against this backdrop, expectations for Fed rate cuts in 2026 have vanished; bond traders were even briefly positioned for possible rate increases.

When a ceasefire between the United States and Iran was announced on April 8, the news sparked a jump in stocks. Since then, the market has gradually erased all the losses posted early in the conflict, and then some. The S&P 500 is up nearly 11% from the bottom.

While the ceasefire looks rocky and weekend peace talks failed, investors continue to expect a resolution soon. Greg Swenson, director of equities at Leuthold Group, says, “In general, it seems like the market has moved past the conflict,” since “both sides are willing to negotiate.” In addition, he thinks the midterm elections this fall and President Trump’s low standing in opinion polls will prod the administration to seek a faster resolution.

Critically, the ceasefire took the air out of the upward march of oil prices. “Once that started to unravel, that’s when this market took off. That’s clearly what’s feeding this risk appetite,” says Adam Turnquist, chief technical strategist at LPL Financial.

Miletti says conflicts such as the Iran war “create a lot of volatility in the moment” but are blips compared with “systemic damage to the financial system that has a more long-term effect,” like the global financial crisis. Going into the war, stimulus from the “One Big Beautiful Bill” provided a good backdrop for stocks, she says: “Less regulation, more tax benefits to companies and to consumers to spend.”

Investors have also grown accustomed to policy reversals that have accompanied Trump administration decisions ranging from going to war to trade policy. “Last year, we had the sticker shock of tariff announcements, and then de-escalation,” says Turnquist. “That’s the playbook as earnings kick off.”

Good earnings, good valuations

To Mark Hackett, chief market strategist for Nationwide, “the rally is being driven more by positioning than conviction. Investors remain cautious, but the resilient data and a steady earnings backdrop continue to challenge that view.” To turn the rally into a durable push higher, “the market needs a fundamental catalyst … and that may come during earnings season.”

Analysts say earnings are central long-term drivers of stock returns. With oil prices down from their peaks and both sides of the conflict seemingly working toward a resolution, investors can focus on what is expected to be a solid first-quarter earnings season. S&P 500 earnings are forecast to have risen 12.6% during the quarter, according to FactSet, about even with the pace a year ago. Meanwhile, the S&P 500 trades at 20 times forward earnings. “That’s right at the five-year average and below where it was throughout most of 2025 and the latter half of 2024, thanks to the strong earnings growth,” says Swenson.

In a note to subscribers, Wall Street analyst Ed Yardeni wrote that consensus estimates for S&P 500 revenue growth is 8.5% for this year and 7.6% for 2027, compared with the 4.3% annual growth rate since 1993. Meanwhile, they expect S&P 500 operating earnings per share to rise 19.3% this year and 16.7% next year, versus the 8.8% annual growth rate since 1993.

Concerns remain for stocks, but optimism reigns

To be sure, plenty of concerns remain. New hostilities could trigger a renewed jump in oil prices, and with the Strait of Hormuz remaining closed, global growth is at risk.

Strong earnings growth has to materialize. “We can’t control the macro, but earnings and free cash flow really can’t disappoint collectively, or the market risk is definitely to the downside,” Miletti adds.

One bright spot: Technology stocks are starting to look cheap. The S&P 500 IT sector fetches 35 times trailing earnings. This is “right where it was in mid-2023. The sector is up 100% since then, but earnings have doubled right alongside it,” explains Swenson. Meanwhile, the AI infrastructure buildout remains intact.

For a durable breakout, “you need Big Tech to participate,” says Turnquist. “That was the anchor that prevented the S&P 500 from clearing 7,000 prewar. If we start seeing Nvidia NVDA, Microsoft MSFT, Apple AAPL start to break out, this will be a pretty clear sign that this is more of a durable recovery.”

Yardeni expects the S&P 500 to hit 7,700 by the end of this year, about 10% higher than its current level. “It could be higher if the analysts’ estimates hold,” he wrote.