U.S. stocks hit new records as the S&P 500 rose 0.3% to an all-time high of 7,230.12 on Friday. The rally comes despite a military stalemate between the United States and Iran that has triggered a double-blockade of the Strait of Hormuz, driving global oil prices above $100 a barrel. While consumer confidence has tanked due to soaring gas prices and inflation above 3%, investors are prioritizing a streak of corporate earnings that have largely ignored the geopolitical chaos.
Strong performance from major tech companies is fueling the buoyancy. Alphabet is on track to earn over $120 billion in profits this year, while Meta reported a 61% year-over-year increase in its latest quarterly results. Overall, approximately 84% of S&P 500 companies have topped analyst estimates so far this season, pushing average profit margins to their highest point in 15 years.
Tech leads the global surge
The tech-heavy Nasdaq composite also reached a record close on Friday, supported by Apple’s 3.3% jump following a profit beat. This momentum carried over into Asian markets on Monday morning:
- South Korea’s Kospi gained 4.7%, led by a 4.8% surge in Samsung Electronics.
- Taiwan’s Taiex climbed 4.6% as chipmaker TSMC shot up 6.6%.
- Hong Kong’s Hang Seng jumped 1.5% to 26,173.95.
Valuation concerns. The S&P 500 recently surpassed a price-to-earnings ratio of 30, a level seen only three other times in the last 156 years. While some analysts warn this historically precedes market crashes, others argue that AI-driven productivity and corporate pricing power justify the premium. However, the high energy prices from the blockade are currently pulling about $4 billion a month out of American consumer pockets, creating a potential headwind for summer spending.
The focus now shifts to whether the U.S. military’s "Project Freedom" can successfully escort ships through the Strait of Hormuz. While President Trump announced the initiative would begin Monday, Iran has already rejected the plan. If the blockade remains into the summer, the resulting energy costs may finally dent the corporate profit margins that have kept stocks untethered from the broader economic gloom.
