Despite Iran Conflict, Stock Market Soars to Record Highs
Not even halfway through the year, 2026 has been a rollercoaster ride for stock market investors. In early February, the major U.S. stock market indexes were all trading at or near their respective all-time highs. Investors were optimistic that the robust gains experienced in 2025 would simply carry over into the new year.
But on Feb. 28, President Trump and Israel launched a joint military campaign against Iran. The punishing attacks targeted Iran’s leadership, nuclear facilities and military infrastructure. In response, Iran effectively shut down the Strait of Hormuz, which lies on its southern border.
The Strait of Hormuz is a critical waterway and maritime passage used for the transportation of crude oil out of the Middle East. The Middle East region produces roughly 30% of the world’s crude oil. Moreover, 25% of the world’s total crude oil produced each year passes through the Strait of Hormuz in ocean-going cargo ships.
Iran’s actions to shutter the Strait of Hormuz quickly reverberated across the global financial markets. By April 7, just 39 days after the conflict started, the price for a barrel of West Texas Intermediate (WTI) crude oil had risen 68% to a four year high of $112.95. WTI is the benchmark grade of crude oil produced in the U.S. It serves as one of the three main pricing barometers of the global petroleum industry, alongside North Sea Brent and Dubai crude.
The potential impact of soaring crude oil and energy prices on the U.S. and global economies sent the stock market reeling. By the end of March, the bellwether S&P 500 stock index had fallen 8.7% while the Dow Jones Industrial Average (DJIA) declined by 7.8%. The tech-heavy NASDAQ was hit the hardest, falling by nearly 13%.
But fast-forward to today. On Wednesday, both the S&P 500 and NASDAQ stock indexes each soared to new record highs. For the NASDAQ, Wednesday was the eleventh consecutive daily gain. The 11-day winning streak was the longest consecutive number of daily gains for the NASDAQ since November 2021. During this stretch of time, the NASDAQ rose 15.5%, its largest 11-day gain in history.
The S&P 500 also reached a record high on Wednesday, posting a gain on 10 of those 11 days and rising a combined 10.7%. Meanwhile, the DJIA posted a 7.2% gain but finished Wednesday’s trading session just 4.1% from its all-time closing high set in January. During this 11-day period, the DJIA recorded a daily gain on seven days while declining on four days.
Despite the ongoing chaos in Iran and the Strait of Hormuz, what’s behind the recent surge in the U.S. stock market?
Wall Street seems encouraged in the progress of ongoing U.S.-Iran negotiations to end the conflict. An end to hostilities would reopen the Strait of Hormuz, allowing the critical flow of crude oil to resume. This optimism has sent global crude oil prices tumbling. The price for a barrel of WTI fell to $91.44 on Wednesday, a 19% decline from the four-year high of $121.95 recorded on April 7.
Despite Wall Street’s optimism, a final resolution to the U.S.-Iran conflict is far from certain. According to the U.S. State Department, Iran is the world’s largest state sponsor of terrorism. One of Trump’s key conditions for any ceasefire is that Iran give up its ambitions to acquire a nuclear weapon. And so far, at least, that remains a condition that Iran has been unwilling to concede.
Mark M. Grywacheski, Investment Advisor
Quad Cities Investment Group is a Registered Investment Adviser.
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