Missiles in Flight, Global Stocks Soaring: Five Reasons Behind This Counterintuitive Rally
Analysts attribute this 'counterintuitive rally' to five key supports: expectations of diplomatic mediation signal that uncertainty has peaked; the ingrained mindset of 'buying the dip' offsets panic; strategic petroleum reserves effectively hedge energy shocks; nearly 80% of S&P 500 constituents have beaten earnings expectations, building a fundamental defense line; and the AI wave returns, with tech giants' robust computing power demand and earnings growth serving as the core engine hedging geopolitical risks
Nearly two months after the outbreak of the Iran conflict, global stocks have not only avoided collapse but surged counter-trend, steadily advancing toward historical highs. Behind this seemingly contradictory "counterintuitive rally," five structural forces are underpinning investor confidence.
From the United States to the Asia-Pacific region, a clear divergence has emerged between stock markets and geopolitical tensions. After the initial shock subsided, market focus shifted from the battlefield to earnings season—AI trading has regained vitality, emerging market stocks continue to attract capital inflows, and the dollar has largely erased its early gains from the conflict, indicating that investors are loosening their pricing for the worst-case scenario.
"The market may be applying a 'temporary' principle to a situation that will likely continue to unfold over an extended period," said Magdalena Polan, Head of Emerging Markets Macro Research at PGIM Fixed Income. "Investors remain focused on global liquidity and are interpreting fundamentals through an optimistic lens."
Below are the five reasons cited by media analysis for why global markets have maintained resilience amid geopolitical conflict.
Uncertainty Has Peaked
Analysts believe the market has fully priced in the worst-case scenario and believes there is a potential exit for the conflict. Both Washington and Tehran have kept negotiation channels open, and the issuance of extended ceasefire declarations has bolstered market confidence in a final agreement.
In other words, despite ongoing geopolitical tensions, more and more investors believe that diplomatic mediation—rather than total collapse—is the most probable outcome of this conflict.
The "Buy the Dip" Mindset Is Deeply Entrenched
A relentless stream of headlines and Trump's frequent policy shifts have caught many investors off guard. However, many cite the playbook from the early days of the Russia-Ukraine conflict in 2022—initial stock sell-offs, sharp rises in commodity prices, followed by a quick return to normalcy. Years of headline-driven volatility have deeply reinforced investors' reluctance to hold short positions long-term, making the "buy the dip" mentality firmly entrenched.
Strategic Reserves Build an Oil Buffer
Energy supply shocks triggered by the war have driven up oil and gasoline prices. However, except for acute shortages in some emerging countries, no widespread economic shutdown feared by the market has been triggered thus far. The release of record-sized strategic petroleum reserves, partial spare capacity from major oil-producing nations, and automatic contraction on the demand side have collectively played a buffering role.
Greg Calnon, Head of Global Public Market Investments at Goldman Sachs Asset Management, told Bloomberg Television that even with a prolonged blockade of the Strait of Hormuz, current market pricing still assumes that energy supply order will relatively quickly return to calm. However, if the disruption to the strait continues to spread, it could still evolve into more severe economic consequences.
Corporate Earnings Inject a Strong Stimulus into the Market
Robust performance has provided key support for this rebound. According to data compiled by Bloomberg, among S&P 500 constituents that have already reported Q1 results, nearly 80% of companies have beaten analysts' earnings expectations. Multiple brokerages have raised their full-year earnings growth forecasts, and analysts' overall assessment of fundamentals has also turned increasingly optimistic.
AI Trading Returns
Tech stocks are the primary engine behind this stock market rally, with solid AI demand allowing related companies to demonstrate strong resilience in earnings even amidst the war. SK Hynix reported a fivefold jump in quarterly profits last Thursday, and the South Korean memory chip giant reiterated its plans to increase capital expenditure. Previously, TSMC had raised its 2026 revenue outlook, while Samsung Electronics recorded an eightfold increase in quarterly profits.
Analysts point out that the upcoming earnings reports and spending plans of mega-scale cloud computing providers will be the key catalysts driving further stock market gains.
