The Iran War Is 100 Days Old. Wall Street Moved On. The Fed Can't.

The Iran war is now 100 days old.

Oil is still expensive. Inflation is hotter. The Strait of Hormuz is still not fully normal.

And the S&P 500 is still near record highs, up more than 7% from before the first US and Israeli strikes on February 28.

That sounds strange. It is not quite as strange as it looks.

What happened first

The initial reaction was severe. The S&P 500 fell nearly 10% in the days following the first strikes as oil spiked toward $115 per barrel and fears of a prolonged Gulf energy shock dominated headlines. South Korea's KOSPI, one of the world's best-performing markets heading into the war, fell 12% in a single session.

The recovery was one of the fastest in modern market history. J.P. Morgan noted that the S&P 500 returned to pre-conflict levels in just 11 trading sessions — one of the quickest recoveries in 36 years.

Investors who sold at the lows were wrong. Investors who held were right — at least so far.

Why stocks bounced

Three forces drove the recovery.

The US is energy-insulated. Unlike Japan, South Korea, or most of Europe, America is a net oil exporter. Higher energy prices hurt consumers, but they also benefit the US energy sector, which hit record highs as oil climbed above $100. The pain was real but partially self-offsetting in a way it simply is not for energy-dependent economies.

AI earnings overwhelmed the geopolitical noise. Q1 2026 delivered 28.6% corporate profit growth — more than double expectations — driven heavily by Nvidia, Alphabet, Amazon, and Meta. That earnings tailwind was simply larger than the geopolitical headwind for most of the quarter. Netwealth CIO Iain Barnes framed it directly: equity markets were "led by those companies seen as direct beneficiaries of AI spending."

The market priced in containment, not peace. Morgan Stanley's analysis of 75 years of geopolitical shocks found the S&P 500 rises 8.4% on average in the 12 months after such events. Markets are forward-pricing machines. Investors collectively bet that the worst-case oil scenario would not last long enough to break the economy. So far that bet has paid — imperfectly, but it has paid.

What did not bounce back

The market's recovery does not mean the war's economic damage has been neutral.

Oil has not returned to pre-war levels. Brent crude averaged around $67 before the conflict. It is trading in the mid-$90s now — roughly 40% above the pre-war baseline, with Reuters reporting Monday that fresh strikes pushed crude back above $95.

Inflation followed. US CPI hit 3.8% in April, its highest in nearly three years, with energy accounting for a large share of the monthly increase. The Strait of Hormuz remains partially constrained — approximately 20% of the world's seaborne oil and LNG passes through it — and one energy market analyst warned CNBC that if inventories continue depleting through June, "a break back over $100 will be imminent."

Rate-cut hopes are gone. The persistent inflation the war helped sustain is a significant reason why the Fed is now leaning toward hiking rather than cutting. The May jobs report added fuel to that fire. Warsh's first FOMC meeting begins June 16 in an environment that the pre-war baseline could not have predicted.

The winners and the losers

Inside the market's headline recovery, there is a war-driven redistribution of value that the index level obscures.

The energy sector won decisively, surging more than 27% at its peak as oil climbed. AI-exposed technology companies won. Defensive names held up.

Airlines, shipping-dependent retailers, consumer staples companies with elevated input costs, and rate-sensitive sectors like real estate have all underperformed. The S&P 500 looks fine. The companies most exposed to high oil and high rates look considerably less fine.

What the market may be underestimating

The risk is not that the war exists. The market has shown it can price around that. The risk is that oil stays elevated long enough to force the Fed's hand into a hike that slows growth more than the AI earnings engine can offset.

A blowout jobs report, a potential hot CPI print tomorrow, and Brent crude bouncing back above $95 heading into Warsh's first meeting is a specific, identifiable sequence that the market at current levels is not fully pricing.

The ceasefire dynamics remain fragile. Hezbollah has rejected the Lebanon terms. Iran's five-point counter-proposal demands that the US accept Iranian sovereignty over the Strait of Hormuz — a condition no administration could accept publicly. The conflict is contained. It is not resolved.

The bottom line

The stock market did not ignore the Iran war. It decided the war was manageable. That bet has been correct for 100 days.

What has not been managed is the inflation the war helped create, the oil prices that haven't normalized, and a Fed that is now in hiking rather than cutting mode. Those are the places where the war's impact is still live — and where the next 100 days could look different from the first.

Sources

• 100 days of the Iran war: How global markets and the economy have been affected (CNBC): https://www.cnbc.com/2026/06/07/iran-war-100-days-trump-stocks-sp500-bonds-oil.html
• Why are stocks at record highs with no Iran resolution? (J.P. Morgan): https://www.jpmorgan.com/insights/markets-and-economy/top-market-takeaways/tmt-why-are-stocks-at-record-highs-with-no-iran-resolution
• Iran war oil shock: stock market impacts (Morgan Stanley): https://www.morganstanley.com/insights/articles/iran-war-oil-shock-stock-market-impacts
• S&P 500 and Nasdaq hit all-time highs despite Iran war (Euronews): https://www.euronews.com/business/2026/04/16/sp-500-and-nasdaq-hit-new-all-time-highs-despite-iran-war-effects
• The S&P 500 is proving one crucial fact about the AI boom (Inc./Opening Bell Daily): https://www.inc.com/phil-rosen/stock-market-iran-conflict-outlook-economy-rally-ai-trade/91357301