Hormuz Strait Blockade, Oil Prices Surge Past $100—Why Isn’t the U.S. Stock Market Falling?
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Hormuz Strait Blockade, Oil Prices Surge Past $100—Why Isn’t the U.S. Stock Market Falling?
Wall Street institutions and Reddit forums each have their own answers.
Navigating Web3 tides with focused insightsAuthor: Claude, TechFlow
TechFlow Introduction: U.S.-Iran negotiations collapsed, the Strait of Hormuz blockade was initiated, and oil prices surged back above $100 per barrel—yet the S&P 500 rose 1% on Monday, fully recovering all losses incurred since the outbreak of the Iran conflict, closing at 6,886. JPMorgan, Morgan Stanley, and BlackRock all issued bullish statements on the same day, with identical core logic: corporate earnings resilience far exceeds the impact of geopolitical shocks. Meanwhile, Reddit’s investing forum exploded, with retail investors exclaiming, “The market simply ignores the news.”
On the first trading day following the collapse of U.S.-Iran negotiations, U.S. equities traced a curve that left everyone puzzled.
On April 13 (Monday), the S&P 500 rose 69 points, or 1%, to close at 6,886; the Dow Jones Industrial Average gained 302 points, or 0.6%; and the Nasdaq Composite rose 1.2%. On the same day, former President Trump announced on social media that the U.S. Navy would immediately initiate a blockade of the Strait of Hormuz. Brent crude briefly breached $100 per barrel before retreating to close around $98.16, while WTI crude closed at $97.82.
The S&P 500 reached its highest level since late February, fully recouping all losses incurred since the outbreak of the Iran conflict. The simultaneous surge in oil prices and equity prices appears logically contradictory—but the world’s largest Wall Street institutions offered a highly consistent explanation: corporate earnings remain robust, the geopolitical shock is expected to be short-lived, and the current moment represents an ideal window for buying on dips.
Three Major Institutions Turn Bullish on the Same Day, Citing Earnings Resilience as Core Rationale
In a research note authored by strategist Mislav Matejka, JPMorgan stated that sell-offs driven by geopolitical shocks should ultimately prove to be buying opportunities.
Morgan Stanley’s strategist Michael Wilson and team judged the recent S&P 500 selloff more akin to a correction than the start of a sustained downtrend, citing improving earnings growth and valuations returning to reasonable levels as supporting factors. Morgan Stanley continues to favor cyclical sectors—including financials, industrials, and consumer discretionary—as well as high-quality growth names such as AI hyperscale computing infrastructure.
BlackRock Investment Institute upgraded its U.S. equity rating from “neutral” to “overweight” on the same day—the most aggressive move among the three. Jean Boivin, Head of BlackRock Investment Institute, noted that the technology sector’s valuation premium has eroded, while its 2026 earnings growth forecast has risen to 43%, up from 26% last year.
In its weekly market report, BlackRock pointed out that two key indicators triggering its decision to re-add positions have already materialized: first, concrete evidence showing shipping traffic through the Strait of Hormuz is resuming; second, proof that the macroeconomic damage caused by the conflict remains manageable and contained.
All three institutions cited the same dataset: according to LSEG I/B/E/S data as of April 10, the S&P 500’s Q1 earnings growth forecast stood at 13.9%, up from 12.7% prior to the conflict. In other words, nearly seven weeks after the outbreak of hostilities, analysts have not only refrained from downgrading earnings expectations—they have raised them.
Valuation Compression of the “Magnificent Seven” Becomes a Buying Catalyst
JPMorgan specifically highlighted in its report that the forward P/E premium of the “Magnificent Seven” (NVIDIA, Apple, Microsoft, Meta, Google, Amazon, and Tesla) has narrowed sharply—from 1.7x the S&P 500 level previously—to just 1.2x.
This metric serves as a key argument for Wall Street bulls: the concentration risk that has constrained market breadth over the past two years is now self-correcting as valuations normalize.
BlackRock noted that the technology sector’s valuation premium relative to the other ten sectors has fallen to its lowest level since mid-2020. The firm stated that, against a backdrop of resilient earnings expectations and limited global growth damage, it is re-increasing exposure to U.S. equities and emerging markets.
Historical Data Backs the View: Geopolitical Shocks Are Typically Digested Within Six Weeks
Wall Street’s optimism is not baseless. UBS research shows that when the S&P 500 falls 5%–10% within three to four weeks, it historically rebounds to pre-conflict levels within six months.
LPL Research’s review of geopolitical shocks since World War II reveals an average first-day reaction of roughly a 1% decline, an average peak-to-trough drawdown of about 5%, an average time to bottom of approximately 19 days, and an average recovery period of roughly 42 days.
In a mid-March research note, UBS observed that from the outbreak of hostilities on February 28 through March 13, global equities fell only ~5%, while oil prices rose ~40% during the same period. The equity market’s apparent “blunt response” to the oil price shock itself validates the aforementioned historical pattern.
On April 6, UBS lowered its year-end S&P 500 target from 7,700 to 7,500 and its medium-term target from 7,300 to 7,000—but maintained its overall assessment that U.S. equities remain “attractive,” keeping its 2026 EPS forecast unchanged at $310.
Reddit Investors’ Existential Question: “The Market Simply Doesn’t React to News”
While institutional consensus can be explained with data, retail investors’ reactions offer a more visceral reflection of current market sentiment.
On Reddit’s r/stocks forum, a post titled “You Believe It Now? The Market Doesn’t Move on News” garnered 923 upvotes and 159 comments. The poster’s central thesis was: “Markets move first—and then rationalize later.” He described the Strait of Hormuz blockade as the clearest example he had ever witnessed, with numerous comments expressing bewilderment at the disconnect between geopolitical risk and market pricing.
“The market is rising because most people believe this won’t matter five years from now—and that’s not irrational,” read another top-voted comment, earning 344 upvotes and 199 replies—representing the typical stance of long-term investors.
On r/wallstreetbets, a post with 504 upvotes pointed out that the physical oil market is “screaming supply shock,” yet equity markets remain calm—a contradiction in signals leaving traders disoriented.
Retail confusion and institutional confidence stand in stark contrast—but both reflect two sides of the same coin: institutions are betting on earnings resilience and the limited scope of the conflict, while retail investors wonder why bad news hasn’t triggered a downturn.
The answer may be simple: the market completed its initial pricing in March, and is now in a “bad news exhausted” rebound phase.
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