More than a month after the outbreak of the Middle East conflict, US stocks have recovered.
Over the past period, Wall Street has been selectively &#34;filtering out noise.&#34; The S&amp;P 500 Index has risen nearly 10% cumulatively since March 27, while the Nasdaq 100 gained approximately 12% during the same period, closing higher for 10 consecutive trading sessions—marking the longest such streak for the index since 2021.
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More critically, the S&amp;P 500 fully erased all losses incurred since the Iran war began in Monday's trading session.
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<h2>&#34;Market Has Declared Victory&#34;</h2>
Rich Privorotky, head of Delta One at Goldman Sachs' trading desk, pointed out: &#34;The market appears to have declared victory in its 'war' with Iran, even though the conflict itself has not truly ended.&#34;
While some argue that Iran is simply waiting for the right moment, Privorotky expressed surprise at Iran's current response: &#34;Houthi forces have taken no escalation actions in the Red Sea region, drone attacks have not increased, and ceasefire agreements remain intact.&#34; He believes declaring victory may be premature, but the stock market clearly perceives the situation as stabilized.
Goldman Sachs strategist Chris Hussey stated bluntly: &#34;It has been over a month since the Iran war broke out. It is incredible that the S&amp;P 500 Index has risen 1.6% year-to-date so far—a scenario that was unimaginable just last week. Despite numerous ups and downs on the path to final peace, equities are forward-looking tools. As we previously wrote, markets cannot afford to wait for the consequences of solving problems they know will eventually be resolved—this dynamic explains today's market behavior and the reasons for regaining strong performance.&#34;
Market logic is shifting. Doug Peta, Chief US Investment Strategist at BCA Research, noted: &#34;Stock markets, and indeed the entire financial market, seem to care less about the situation in the Strait of Hormuz.&#34;
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In overnight trading, the &#34;leaders&#34; in the artificial intelligence sector are also emerging. The Mag 7 continued to rally strongly, rising 3%, with a cumulative gain of 15% over the past 10 trading sessions (up in 9 of those 10 sessions).
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The chip sector was a key driver of this rebound. Bloomberg data shows that earnings expectations for the chip sector jumped approximately 10% over three trading sessions, significantly boosting overall S&amp;P 500 EPS forecasts. Goldman Sachs data indicates that NVIDIA and Micron are expected to contribute over 50% of the S&amp;P 500's EPS growth for this quarter.
This rebound is not just a story about stocks.
US Treasury yields fell alongside declining oil prices, dropping across the board by about 3 to 4 basis points. Bitcoin breached $76,000, reaching a new high since the conflict began. Gold traded above $4,800, its highest level since March 18. The US dollar continued to weaken, erasing almost all gains made since the outbreak of war.

Market liquidity is also returning to normal. According to Goldman Sachs data, top-of-book liquidity for S&amp;P 500 constituents has recovered from approximately $3.5 million at the peak of geopolitical uncertainty to $13.16 million, representing a 141% increase compared to the 20-day average. The proportion of ETF volume relative to total market volume has also fallen from a peak of around 50% to 29%.
And here is an interesting phenomenon: Trump's &#34;familiar script&#34; seems to be playing out again...
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<h2>Capital &#34;Chasing Prices Unidirectionally,&#34; Short Sellers Forced to Cover</h2>
Regarding this strong rebound in US stocks, a senior equity trader said: &#34;Capital flows are unidirectional... CTA funds, clients, everyone was underweight on risk exposure, and now they are all chasing prices.&#34;
Behind this &#34;panic buying&#34; lie multiple overlapping forces:
Institutional investors led the rebound. Mark Hackett, Chief Market Strategist at Nationwide, noted that after large-scale selling, institutional focus has shifted back to fundamentals, which are supportive.
CTA funds bought heavily, while long-term funds and hedge funds sold. According to Goldman Sachs trading desk data, long-only funds (LO) saw small net sales, while hedge funds (HF) recorded net sales of 3%, primarily reducing positions in information technology, industrials, and communication services sectors—they were absorbing buy orders from CTAs.
Short covering accelerated. Goldman Sachs' rolling short baskets experienced three significant spikes; non-profit tech stocks surged, and heavily shorted stocks faced squeeze conditions.
Goldman Sachs' trading desk attributed the sustained strength of the &#34;Mag 7&#34; to four factors: improving geopolitical backdrop driving repositioning of index hedges (Mag 7 accounts for approximately 33% of S&amp;P 500 weight), tapering of fund rotation trades since Q1, markets positioning early for strong earnings season expectations, and ongoing share buyback programs providing support.
<h2>Earnings Season Takes Over, Fundamentals Repriced</h2>
The shift in market narrative is supported by data.
This week, major financial institutions including JPMorgan Chase, Citigroup, Wells Fargo, and BlackRock sequentially released their first-quarter earnings. Goldman Sachs' Chris Hussey noted that the banking sector is typically seen as a barometer of overall US economic health: &#34;Today's earnings reports show that despite market concerns about inflation, AI, private credit, and consumer spending, both households and businesses remain robust.&#34;
Inflation data also provided support. March PPI rose 0.5% month-over-month, below expectations. However, RBC Capital Markets interest rate strategist Blake Gwinn cautioned, &#34;Markets are increasingly interpreting PPI data through the lens of PCE transmission,&#34; tending to &#34;view weak data as a lagging indicator and believe inflationary pressures are still on the way.&#34;
<h2>Stocks &#34;Look Forward,&#34; Oil Market Still Waiting</h2>
Notably, a clear divergence has emerged between the stock market and the oil market.
WTI crude futures fell below the $91 level that day. Polymarket data shows the probability of WTI breaking below $90 by month-end is rising rapidly. The immediate triggers for the oil price decline include reports that Iran is considering suspending some oil exports to push negotiations forward, and that the US and Iran are discussing a second round of peace talks.
Market data—the crude oil forward curve (represented by December Brent futures)—suggests the oil market believes resolving supply disruptions will take longer. This contrasts with the optimistic sentiment of the stock market, which acts as if the task is complete.
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Chris Hussey of Goldman Sachs explained this: &#34;Equities are forward-looking tools; markets cannot afford to wait for the consequences of solving problems they know will eventually be resolved—this dynamic explains today's market behavior and the reasons for regaining strong performance.&#34;
<h2>Risks Remain After the Rebound</h2>
Despite the obvious improvement in market sentiment, several strategists remain cautious about the outlook.
Lori Calvasina of RBC Capital Markets warned that the uncertainty surrounding the war and its ripple effects keep the risk of a &#34;growth panic correction&#34; hanging overhead. She wrote in her Sunday client report: &#34;If the fundamental narrative surrounding the war or its impact changes, from a valuation perspective, there is still room for the stock market to fall further, potentially even deeper than before.&#34;
Nationwide's Hackett expressed skepticism about whether the S&amp;P 500 can break to new highs: &#34;Before substantive progress is made in peace talks, I doubt we can truly break historical highs. But once that day arrives, conservative positions, strong fundamentals, and reset expectations will form a compressed spring force.&#34;
Bond investors remain skeptical about news of improving inflation. Citigroup Global Markets Interest Rate Strategist Raghav Datla stated: &#34;In future reports, it will be difficult to see lower inflation data, and no one can accurately predict what the numbers will be.&#34;
Veteran strategist Ed Yardeni is more optimistic. In his Sunday investor report, he stated that similar to the Russia-Ukraine conflict, financial markets are learning to coexist with the Iran war, maintaining his view that the S&amp;P 500 bottomed on March 30.

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During the Middle East conflict, US stocks quietly completed a V-shaped recovery. The S&P 500 rebounded nearly 10% cumulatively since March 27, while the Nasdaq 100 rose for 10 consecutive days, marking its longest streak since 2021. Goldman Sachs strategists admitted this was "unimaginable just last week," noting that "the market seems to have declared an end to the war and victory." However, some analysts warn that if subsequent negotiations break down, the risk of a market correction remains high

- U.S. stock markets have rebounded strongly despite the ongoing Middle Eastern conflict, with the S&P 500 index rising nearly 10% since March 27.  
- Analysts highlight that the market seems to believe it has "won" the conflict, with significant buying activity driven by institutional investors and short covering.  
- While optimism prevails, concerns remain over potential risks and market vulnerabilities linked to the geopolitical situation and inflation.

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"Market Has Declared Victory!" S&P Rebounds 10%, Nasdaq Rises for 10 Consecutive Days: US Stocks "No Longer Care" About Hormuz, Investors Engage in "Panic Buying"