Stocks keep rising even as conflict churns in the Middle East.

Investors look past headlines

Markets have been quite volatile over the past few weeks. Early turmoil tied to fighting in the Persian Gulf sent oil soaring and stocks tumbling. Then traders did something notable: they started buying again.

After an initial sell-off that pushed major U.S. indexes down, the S&P 500 has recovered in recent sessions, and the Nasdaq 100 has seen a strong run of gains. The rally accelerated after late-March trading, with the S&P 500 rising nearly 10% since March 27 and the Nasdaq 100 advancing about 12% over the same span, according to market tallies compiled during mid-April. The Nasdaq 100 even logged 10 straight sessions in the green — its longest run since 2021.

That rebound came despite periodic shocks. One trading day in April saw the S&P 500 slide 1.7% — its worst single-day drop since January — while the Dow fell about 469 points and the Nasdaq lost roughly 2.4%, pushing it more than 10% below its peak earlier in the year. Oil prices jumped on those moves; Brent crude hit about $101.89 a barrel at one point and U.S. Benchmark crude rose into the mid-$90s per barrel before trimming some gains.

Why traders are shrugging

Several factors are influencing the market. Institutional investors have been moving back into stocks after aggressive selling, and many are deciding company results matter more than geopolitical headlines for now. Mark Hackett, chief market strategist at Nationwide, said institutional flows have helped power the rebound and that fundamentals are once again steering prices.

"As the market settles, I expect that we return to a similar trend to where we started the year, with significant differentiation between winners and losers, with strength in international, small caps and value," Hackett said.

That emphasis on earnings season is reshaping how traders respond to news. With corporate reporting underway, firms' revenue and profit surprises are driving stock moves more than stray headlines about negotiations or skirmishes. Analysts note that when company results are encouraging, money managers tend to look past headline risks and redeploy cash into equities.

Macro risks still loom

Make no mistake — the risks are still present. The war has kept oil prices elevated and pushed bond yields around, creating potential drag for growth-sensitive sectors. At peaks of the recent flare-up, Brent crude climbed from roughly $70 a barrel before the conflict to levels above $100, underscoring how supply fears can quickly pump energy costs higher.

And while many traders appear willing to accept higher near-term risk, market structure changes matter. Index-tracking funds and increased correlations among stocks have amplified moves when big flows hit or when macro headlines dominate. A gauge of realized one-month correlation among index members edged toward its highest reading since May on some measures, suggesting that stocks were trading more in step during the rebound than on company-specific news.

Strategists weigh in

Doug Peta, chief U.S. Investment strategist at BCA Research, said equity markets don't seem overly worried about disruptions through the Strait of Hormuz. "It just doesn't seem that the equity market, or really financial markets in general, are all that concerned about the Strait of Hormuz," Peta said, pointing to the steady buying in stocks even as the narrow waterway remained a flashpoint for tanker traffic and oil shipments.

Ed Yardeni, a veteran strategist, drew a parallel to earlier conflicts, saying markets often learn to price in prolonged geopolitical fights and then focus again on economic data and corporate earnings. Yardeni told investors he believes the S&P 500 may have already hit a bottom at the end of March. That view helped fuel confidence among some money managers that the worst of the panic was behind them.

Where the risk premium went

The key point is that much of the risk premium investors demanded at the start of the war has decreased. As negotiations around technical terms and proposals unfolded, parts of the risk premium baked into equities and bonds started to fall. BCA Research's Peta expects negotiations to move toward de-escalation; if that plays out, much of that extra premium could unwind further.

Still, the relief isn't uniform. Sectors tied closely to energy swung with crude prices, while regional and small-cap stocks showed more variability. Many portfolio managers have tilted allocations toward bigger, more liquid names that can ride out headline shocks, and they've used index vehicles to get exposure quickly. That's helped push correlations higher and has left less room for idiosyncratic stock moves.

Market implications and what to watch

Investors now face a series of tests. First, corporate earnings reports will need to confirm that revenue and profit trends justify the stretch higher in valuations for major indexes. Second, oil's path will remain central — a return to sustained $100-plus crude would pressure margins for energy-intensive businesses and could nudge inflation expectations up. Third, bond markets will keep signaling whether investors think growth or recession is likelier, and those signals influence equity positioning.

Risk management remains active. Many institutional funds are watching realized correlations, adjusting sector bets, and rebalancing exposures between growth and value. Hedge funds and sovereign accounts, meanwhile, are eyeing volatility to time tactical moves. If equities continue to rally without a commensurate drop in geopolitical risk, some strategists warn that the market could be underpricing tail risks.

Still, the tone on trading desks is different than in the immediate aftermath of the first strikes. Dealers report that order flow shifted from frantic selling to selective buying as earnings season picked up. Money managers who sold early have been redeploying capital into areas where company momentum or valuation gaps look attractive.

Markets are proving adaptable. Traders who panicked at the outset of hostilities now face a choice: sit out rallies or rebuild exposure. Many are choosing the latter, at least for now.

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Doug Peta, chief U.S. Investment strategist at BCA Research, said: "It just doesn't seem that the equity market, or really financial markets in general, are all that concerned about the Strait of Hormuz."