The war in Iran is roiling the world, but not the U.S. stock market

Oil prices have risen 40%, as Iran has opened fire on cargo ships leaving the Strait of Hormuz. The United States continues to bomb Iran, claiming to have already hit thousands of targets. As the war continues, central bankers have said they are likely going to keep interest rates elevated, squeezing consumers.

Yet amid all the turmoil, the S&P 500 has fallen just 3.6% since the war began late last month, even after a fourth straight days of losses on Friday.

It is a muted reaction to a war that is threatening to roil the global economy, and one that repeats a pattern among investors who have regularly looked past recent geopolitical upheaval.

Roughly a month after President Donald Trump rolled out his aggressive tariff proposals last April, the stock market bounced back from its steep decline and was soon hitting new highs. Last fall, the government shutdown became a sideshow for investors preoccupied with prognosticators shifting expectations for artificial intelligence.

The war in Iran is raising worries that a prolonged conflict could mean a prolonged disruption to oil supplies leaving the Middle East, pushing oil prices higher, raising the price paid by consumers for gas at the pump, and potentially increasing inflation. For stock investors, that could initially mean higher interest rates as the Federal Reserve tries to slow the pace of price rises, but it could eventually mean lower growth, as consumers struggle to contend with affordability.

But these worries are not all investors are thinking about.

Investors say they are also balancing the risks from oil disruptions against plenty of positives supporting financial markets in spite of what is happening in the Middle East.

Corporate earnings rose by double digits for the fifth quarter in a row for the final three months of 2025, according to data from Factset. The economy, broadly speaking, is solid. The United States remains a leader in artificial intelligence, which has been the thematic engine of the stock market’s rise in recent years.

Perhaps most important, there appears to be consensus among investors that the administration would eventually pull back on its war effort if there is enough political pressure ahead of the midterms or warning signals in the financial markets.

Despite some weakness in more economically sensitive parts of the stock market, “the view is still that Trump ultimately controls this decision and should the signals from the markets become concerning he will wind down this conflict,” said Dan Ivascyn, chief investment officer at Pimco, one of the largest asset managers in the world.

Stock investors have been conditioned in recent years to look through potential market crises. History shows that, eventually, stocks rise past the level they were at before a crisis began, whether because of an economic recovery, government intervention in financial markets or increasingly, because of proclamations made by Trump.

Instead of selling as prices plunge, some investors now see any drop in stocks as a chance to invest more money at a lower price, profiting from what they believe will be an inevitable recovery.

Investors who followed this strategy were rewarded on Monday after the price of Brent crude, the international oil benchmark, surged to almost $120 per barrel, its highest level since the coronavirus pandemic. With the prices spiking, Trump emphasized that the war was well ahead of schedule. It was just the news the markets wanted to hear. Oil prices eased. Stock prices stabilized.

Even as oil prices rose above $100 per barrel on Thursday, the stock market’s slide remained orderly, traders said.

While current oil prices have risen, futures contracts that lock in prices months in advance remain much lower. Brent crude futures for December rose to $80.72 on Thursday, up 18% since the war began, versus a rise of 39% for contracts expiring next month.

“The market is making a bet that whatever happens, this will not go on permanently and oil prices will come back down,” said David Kelly, chief global strategist at JPMorgan Asset Management. “If that is what the oil market says, then the stock market is taking a certain amount of comfort from that.”

Since October, stocks have been treading water, sometimes nudging a little higher, sometimes nudging a little lower, but broadly staying within a range. The peak for the S&P 500 since October was in January, at a level of 6978.60. The trough came earlier, in November, at 6538.76, below the current level of the index. That’s a range of just 6.7% – a range the index is still comfortably in after two weeks of the conflict in the Middle East.

“That’s really indecision,” said Adam Turnquist, chief technical strategist for LPL Financial. “There is a lack of conviction.”

But investors and analysts also warn that investors’ patience may be running thin.

While oil futures expiring in many months time remain markedly lower than current prices, Brent crude is still priced to stay above $95 through June.

And there are growing signs that investors are becoming less confident that the administration can control the conflict and keep oil supplies flowing. Oil prices rose Thursday despite efforts by officials around the world to contain them, including the release of oil reserves in Europe.

The Vix volatility index, known as Wall Street’s “fear gauge,” has risen back to levels last seen during the tariff turmoil in April. It also still remains well below the worst levels reached back then.

“The administration is saying one thing, but what is going on in the Middle East and Iran is another thing,” Turnquist said, adding that “it’s going to be a messy couple of months until hopefully we get some clarity.”

This article originally appeared in The New York Times.