Why Are Stocks at Record Highs with no Iran Resolution?

Executive Director, Global Investment Strategist, J.P. Morgan Private Bank

A nearly 10% drawdown, and a swift recovery. All within just six weeks. The S&P 500 is now trading near all-time highs. And yet, there has been no resolution to the conflict in Iran, or even a clear roadmap of next steps. Just a naval blockade around one of the world’s busiest waterways.

Markets sell first and ask questions later in the face of uncertainty. That’s no secret. But stock market bounce backs seem to be happening faster and faster. In some ways, it’s a sigh of relief. But it breeds a nagging question: Is the market shrugging off conflict risk… again? Or are investors anchoring their hopes on something more durable?

A faster-than-ever V-Shaped rebound

For some, the market action over the past two weeks has been a headscratcher. Several major global equity indexes hit or approached record highs in a tear that included a 13-day Nasdaq 100 winning streak, marking its longest string of gains in over a decade. Even the S&P 500 and Russell 2000 have seen 9% and 11% month to date gains, respectively. The rally has been indiscriminate.

The speed of the rebound may seem extreme. After a nearly 10% drawdown in the S&P 500, a full recovery to preconflict levels took only 11 trading sessions. Cautious investors may think that’s too fast, but over the years, recoveries have become faster and faster thanks to outsized liquidity, evolved market structures and often easier monetary policy. Staying invested, despite geopolitical volatility, can yield long-term gains. Investors remember that and are favoring reengagement.

Market declines have recovered faster and faster

This bar chart shows how many days it took the stock market to recover from major drops of more than 10% across ten different events, stretching from the early 2000s to 2026. The oldest crises took by far the longest to bounce back — the dot com crash required 1,166 days (2000–2007) and the global financial crisis needed 1,021 days (2007–2013), with both bars extending well above the chart's 400-day scale. From there, recovery times shortened considerably: the EU debt crisis took 99 days (2011–2012), China's currency devaluation took 103 days (2015–2016), hiking cycle fears in 2018 took 137 days (2018), the U.S.-China trade war took 81 days (2018–2019), and COVID-19 took 103 days (2020). The 2022–2023 hiking cycle was a notable outlier in the more recent stretch, requiring 318 days (2022–2023). The two most recent events recovered fastest of all — the 2025 tariff tantrum took just 55 days (2025), and the 2026 Iran conflict, shown in orange to distinguish it as still in progress, has taken only 11 days so far (2026), though the chart notes this represents a 9.1% decline, meaning it hasn't quite crossed the 10% threshold.

Source: Bloomberg Finance L.P. Data as of April 22, 2026. Note: Iran conflict (2026) is a 9.1% decline.

It’s a similar story abroad. Korean and Taiwanese markets reached record levels. Emerging markets rebounded at an even faster rate than the U.S. benchmarks. But the recovery has been uneven, and that divergence matters. Europe and Japan – despite seeing fierce rebounds – continue to trade well below preconflict peaks.

The rebound hasn’t been felt equally across regions

This line chart, tracks the price return of four major stock market regions since March 30, 2026, with that date set as the starting point of zero percent. It plots four lines over roughly three and a half weeks, from March 30 through approximately April 22, 2026, with each line representing a different region's stock market: Emerging Markets (MSCI EM), the S&P 500, Europe (EURO STOXX 50), and Japan (TOPIX Index). As of April 22, Emerging Markets led with a gain of 13.8%, followed by the S&P 500 at 12.5%, Europe at 6.6%, and Japan at 5.7%.

Source: Bloomberg Finance L.P. Data as of April 22, 2026. Note: Emerging markets: MSCI EM; Europe: EURO STOXX 50; Japan: TOPIX Index.

In Europe, the explanation is straightforward. The region outperformed earlier in the year, in line with international outperformance, and valuations rose alongside aggressive earnings expectations. Going into the energy shock, Europe was already quite vulnerable.

And now, the worry isn’t just about relative valuations, but negative earnings going forward. It’s far from the rosier picture seen in the United States, especially as Europe lacks one of the key drivers of this stock market recovery: a technology weighting.

Prices bounced back, but valuations lagged

Although the S&P 500 returned to its best levels last week, its valuation has fallen from peak levels. At the end of 2025, the benchmark traded above 23x on a one-year blended forward price-to-equity basis. Today, that figure is below 21x. And the repricing is even more dramatic in the technology sector.

Tech valuations are far from their highs

This line chart tracks how expensive stocks look relative to their expected earnings over the next year, comparing the broad S&P 500 against just its technology sector, from April 2025 through April 2026. The tech sector's line sits consistently above the broader market throughout the entire period, reflecting that investors have been willing to pay more for tech stocks. Tech valuations climbed from around 24x in April 2025 to a peak just above 31x around September–October 2025, then fell sharply and steadily, landing at 23x by April 2026. The S&P 500 as a whole followed a similar but more muted pattern, rising from about 20x to roughly 23x over the same early stretch, then declining to 21x by the end. Both lines dropped steeply in early 2026, with tech falling especially hard — losing roughly 8 points from its highs — before a modest bounce in the final days of the chart. The gap between the two lines has narrowed meaningfully, suggesting tech's premium over the rest of the market has shrunk considerably from where it stood last fall.

It’s more than just the price recovery. Future earnings expectations have risen even faster, even as the conflict in Iran weighed on investors. But here’s the twist: the rebound was already underway before geopolitical clarity improved. That suggests this rally is being driven less by confidence around the war and more by faith in the fundamentals.

The prevailing fear during the drawdown was that conflict-related consequences would bleed into corporate margins, investment and ultimately consumer behavior. Instead, early earnings reports show the opposite.

Companies are beating Wall Street’s earning expectations at a pace we haven’t seen in years. With about 25% of the S&P 500 having reported quarterly results so far, roughly 83% have topped earnings estimates. That stands well above the five-year average of 78%. Revenue growth is also on track for its strongest levels since 2022, with 77% of companies topping revenue estimates relative to the five-year average of 70%.

With both revenue and earnings beating estimates at this rate, the recent rally to all-time highs would signal that the bid has been backed by well-founded conviction in corporate America’s fundamentals.

If the rest of earnings season delivers as expected, it would mark six straight quarters of double-digit earnings growth – the longest such streak since the recovery from the 2008 financial crisis.

That said, even with the outsized growth projections, the median stock is expected to grow earnings by about 8%, marginally higher than the 7.5% historical average for the index as a whole. That divergence is driven by the technology story. Powerful earnings growth reinforces that the rebound is not a knee-jerk rally but a durable reflection of strength in the tech sector and the broader index.

All market and economic data as of 04/24/2026 are sourced from Bloomberg Finance L.P. and FactSet unless otherwise stated.

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Investing in emerging markets involves a greater degree of risk and increased volatility compared to developed markets. Changes in currency exchange rates and differences in accounting and taxation policies outside the investor's jurisdiction can raise or lower returns. Some markets may not be as politically and economically stable, in addition to differences in taxation policies, and legal systems outside the investor's jurisdiction may create additional risks. Investors should carefully consider these risks and consult with financial and legal advisors before investing in emerging markets.

Standard and Poor’s 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index was developed with a base level of 10 for the 1941–43 base period.

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