Why don't U.S. stocks fall despite the Hormuz blockade and oil prices breaking $100?

Author: Claude, Deep Tide TechFlow

Deep Tide Guide: The Iran-U.S. negotiations broke down, the Strait of Hormuz blockade was initiated, oil prices returned above $100, but the S&P 500 closed up 1% on Monday, wiping out all losses since the Iran war to 6,886 points. JPMorgan Chase, Morgan Stanley, and BlackRock all issued bullish signals on the same day, with a consistent core logic: corporate earnings remain resilient far beyond geopolitical shocks. The Reddit investment community then exploded, with retail investors exclaiming, “The market simply doesn’t care about the news.”

On the first trading day after the Iran-U.S. negotiations collapsed, U.S. stocks charted a perplexing curve that left everyone confused.

On Monday, April 13, the S&P 500 closed up 69 points, a 1% increase, at 6,886 points; the Dow Jones Industrial Average rose 302 points, up 0.6%; the Nasdaq Composite increased by 1.2%. On the same day, Trump announced on social media that the U.S. Navy would immediately initiate a blockade of the Strait of Hormuz. Brent crude oil briefly surged past $100 per barrel before retreating, closing at about $98.16; WTI crude oil closed at $97.82.

The S&P 500 reached its highest level since late February, fully recovering all ground lost since the outbreak of the Iran war. The surge in oil prices coincided with the stock market rally, seemingly contradictory in logic. However, the biggest Wall Street institutions provided highly consistent explanations: corporate profits remain strong, the duration of geopolitical shocks is limited, and now is a good window for buying on dips.

Three major institutions bullish on the same day, with core logic pointing to earnings resilience

JPMorgan, in a research report authored by strategist Mislav Matejka, stated that the decline driven by geopolitical shocks should ultimately be seen as a buying opportunity.

Morgan Stanley strategist Michael Wilson and his team believe that the recent sell-off in the S&P 500 is more like a correction rather than the start of a sustained decline, supported by improving earnings growth and valuation normalization. Morgan Stanley remains optimistic about cyclical sectors such as finance, industrials, and consumer, as well as high-quality growth stocks like AI supercomputing.

BlackRock Investment Institute upgraded its U.S. stock rating from “Neutral” to “Overweight” on the same day, making it the most active among the three. Jean Boivin, head of BlackRock Investment Institute, said that the valuation premium of the tech sector has been eroded, and the sector’s earnings growth forecast for 2026 has been raised to 43%, up from 26% last year.

In its weekly market report, BlackRock pointed out that two milestones that triggered its re-accumulation have appeared: first, concrete evidence shows that navigation through the Strait of Hormuz is resuming; second, the ongoing macroeconomic damage from the conflict has proven to be manageable.

The three institutions cited the same data: according to LSEG I/B/E/S data, as of April 10, the S&P 500’s first-quarter earnings growth expectation was 13.9%, higher than the pre-conflict level of 12.7%. In other words, nearly seven weeks since the conflict erupted, analysts have not only not lowered earnings expectations but have actually raised them.

The valuation contraction of the “Magnificent Seven” stocks, turning into a reason to buy

JPMorgan specifically mentioned in its report that the forward P/E premium of the “Magnificent Seven” (Nvidia, Apple, Microsoft, Meta, Google, Amazon, and Tesla) has sharply narrowed from 1.7 times the S&P 500 level to 1.2 times.

This data serves as a key argument for Wall Street bulls: the concentration of top stocks that suppressed market breadth over the past two years is easing due to valuation normalization.

BlackRock pointed out that the valuation premium of the tech sector relative to the other ten sectors has fallen to its lowest level since mid-2020. The firm stated that, against the backdrop of resilient corporate earnings expectations and limited global growth damage, it is choosing to reallocate into U.S. stocks and emerging markets.

Historical data supports: geopolitical shocks are usually absorbed within six weeks

Wall Street’s optimism is not unfounded. UBS research shows that when the S&P 500 declines by 5% to 10% within three to four weeks, it typically returns to pre-conflict levels within six months.

LPL Research’s review of geopolitical shocks since World War II indicates that the average first-day reaction is about a 1% decline, with an average peak-to-trough drop of about 5%, an average bottoming time of around 19 days, and an average recovery cycle of about 42 days.

UBS, in a mid-March report, noted that from the outbreak of conflict on February 28 to March 13, global equities only fell about 5%, while oil prices rose approximately 40%. The market’s muted response to oil shocks itself confirms the above historical patterns.

UBS lowered its year-end target for the S&P 500 from 7,700 to 7,500 on April 6, with a mid-term target lowered from 7,300 to 7,000, but maintained an overall view that U.S. stocks remain attractive, with 2026 EPS forecast unchanged at $310.

Reddit investors’ soul-searching: “The market simply doesn’t care about the news”

While institutional consensus can be explained with data, retail community reactions more vividly reflect current market sentiment.

On Reddit’s r/stocks, a post titled “You believe now? The market doesn’t move because of news” received 923 likes and 159 comments. The core view of the poster is: the market moves first, then looks for reasons. The recent Hormuz blockade is the most typical example he has experienced, with many comments expressing confusion about the disconnect between geopolitical risks and market pricing.

“The market rises because most people believe it won’t matter in five years; this is not irrational.” This post received 344 likes and 199 comments, representing a typical stance of long-term investors.

On r/wallstreetbets, a post with 504 likes pointed out that the physical oil market is “screaming supply shocks,” yet the stock market remains calm, and the conflicting signals between the two markets leave traders at a loss.

The confusion among retail investors sharply contrasts with institutional confidence, but the underlying logic is actually two sides of the same coin: institutions bet on earnings resilience and limited conflict, while retail investors are puzzled as to why bad news has not translated into declines.

The answer may be simple: the market completed a round of pricing in March and is now in the “bad news exhausted” phase of correction.