Nearly two months into the conflict in Iran, global stock markets are staging a defiant rally. From the US to Taiwan and South Korea, a disconnect has emerged: while the geopolitical tensions remain high, equities are charging back toward all-time highs.

After an initial shock, financial markets have largely looked past the conflict to focus on corporate fundamentals, even as oil prices remain elevated. Investors are piling back into the artificial intelligence trade and emerging-market stocks, signaling that the worst of the volatility is now in the rearview mirror. The US dollar has mostly given back its gain from the start of the conflict.

“Markets may be applying the ‘transitory’ principle to a situation that will continue to work its way through the system over a prolonged period of time,” said Magdalena Polan, head of EM macro research at PGIM Fixed Income. “Investors are continuing to focus on global liquidity, adopting a glass half full read of fundamentals.”

Here are the five reasons why there hasn’t been a more negative reaction to the geopolitical conflict:

Peak Uncertainty

Analysts say that markets have already priced in a worst-case scenario and believe in a potential offramp from the conflict. With officials in both Washington and Tehran keeping their doors open to talks, and an extended ceasefire declaration, markets have remained confident a deal will be done. In other words, while geopolitical tensions linger, there’s growing belief that diplomacy — rather than a full collapse — is the likely end game.

Dip-Buying Mentality

Rapid-fire headlines and President Donald Trump’s frequent changes in course have caught many investors off guard. Many are referring to the Ukraine-war playbook from early 2022, when an initial equities selloff and commodity price surge soon reversed to business as usual. Years of headline-driven volatility and a dip-buying mindset have further reinforced investors’ reluctance to stay bearish for too long.

Oil Cushion

The war’s energy supply shock may have pushed oil and gasoline prices higher, but outside of acute shortages in some emerging countries it has not yet triggered the broad economic shutdown many feared. Record releases from strategic petroleum reserves, some spare capacity among major oil producers and demand destruction have so far cushioned the impact. However, prolonged disruptions in the Strait of Hormuz could still escalate into more severe economic consequences.

Robust Earnings 

Company earnings have given markets a much-needed shot in the arm. Nearly 80% of the S&P 500 companies reporting first-quarter results so far have beaten analyst earnings estimates, according to data compiled by Bloomberg. A number of brokers have already revised up earnings growth for the year, leading analysts to turn more upbeat on fundamentals.

AI is Back 

Technology shares have been the major driving force behind the stock rally as earnings show resilience amid the war thanks to solid artificial-intelligence demand. On Thursday, SK Hynix Inc. reported a five-fold jump in quarterly profit as the South Korean memory chipmaker reiterated plans to ratchet up its spending. This comes after Taiwan Semiconductor Manufacturing Co. raised its 2026 revenue outlook while Samsung Electronics Co. posted an eight-fold jump in quarterly profit. Analysts say that upcoming earnings and spending plans from hyperscalers will be key catalysts for further upside. 

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Published on April 23, 2026