Market Shows Resilience Amid War and Rising Oil Prices

Despite the onset of war earlier this year, U.S. equity markets have shown remarkable resilience. The S&P 500 is down roughly five percent from its record high on January 27 and has held the 200-day moving average. Analysts are increasingly debating whether the market is discounting a short conflict or a longer drawn-out scenario. Early projections suggested a possible ten to fifteen percent correction, but recent market behavior indicates a more measured response from investors.

Forward-looking earnings estimates are at record highs. Analysts’ consensus for the S&P 500 in 2026 and 2027 rose to $328.80 per share, pushing the implied forward price-to-earnings ratio down to 20.2 from 22.0 earlier this year. Growth is not limited to large-cap stocks. S&P 400 MidCaps and S&P 600 SmallCaps have also seen their forward earnings rise despite geopolitical uncertainty and surging oil prices.

The dollar has strengthened as global investors seek a safe haven. Elevated oil prices have amplified this effect since the United States exports both oil and gas. European, Japanese, and emerging market currencies have weakened in comparison, reflecting the vulnerability of energy importers in the current environment.

Looking globally, the U.S. continues to outperform other developed and emerging markets since the start of the conflict. Equity investors may favor large-cap U.S. stocks while monitoring the war’s duration, energy market developments, and private credit market conditions. Historical patterns from 2022 suggest that a prolonged geopolitical shock can eventually pressure earnings and valuations, but for now, forward projections remain strong.

Investors should maintain a balanced approach. Markets are holding up, but risks remain. ​

Sources:

Yardeni QuickTakes commentary "The War Is Getting Foggier”

https://www.marketwatch.com/story/risks-of-a-bear-market-are-growing-says-goldman-sachs-here-are-the-trades-to-make-534c519d