Why Are Stocks Still Going Up When There's a War Going On?

If you've been watching the news lately, you'd think the world is on fire — quite literally. Yet open up your investment portfolio and somehow, it's... fine? The S&P 500 has actually hit multiple all-time highs during the Iran war. It just doesn't add up, does it?

So here's what's happening on the ground. On February 28, the U.S. and Israel launched airstrikes on Iran, triggering a full-blown military conflict. Iran retaliated by closing the Strait of Hormuz — a narrow waterway that handles roughly one-fifth of the world's oil supply daily, making it one of the single most critical energy chokepoints on the planet. With that passage effectively blocked, Brent crude has climbed back above $100 per barrel. And when oil prices go up, almost everything else follows — transport costs, manufacturing, food, logistics. For Singapore, a country that imports virtually everything, this hits close to home. Higher oil prices mean higher costs for businesses, which eventually means higher prices for the rest of us at the supermarket checkout.

You'd expect markets to panic at all of this. And they did — briefly. The S&P 500 fell about 8% in the initial weeks of the Iran war, from the start of the conflict on February 28 to a recent low on March 30. But then something strange happened. Stocks bounced back. Overall, the S&P 500 has climbed more than 3% since the war began, while the tech-heavy Nasdaq has soared nearly 8% from its pre-war level. Meanwhile, on the ground, gasoline prices are surging, OECD's inflation projections have been revised upward to 4.2% this year. Economists are even raising recession odds. The reality on the street and the reality on Wall Street are telling two very different stories.

So what's going on? Experts point to a few things. The stock market is forward-looking The stock market is forward-looking — investors are betting on a quick resolution to the conflict, largely because they've been conditioned to believe that President Trump will back off if the economic pain gets too intense. This has been dubbed the "TACO" trade — "Trump Always Chickens Out." Strong corporate earnings have also helped ease investor worries, with earnings estimates continuing to climb despite the conflict.

Here's my personal take — and I think there's something real to it. Investors today are a different breed from a decade ago. They've lived through COVID, the Russia-Ukraine war, and Trump's tariff chaos in 2025. Every single time, those who held steady — or even bought the dip — came out ahead. People remember that. So when war breaks out now, the instinct isn't to panic-sell. It's to wait, or even buy. That's not irrational; it's learned behaviour. And honestly? History backs it up — the stock market fell an average of just 4% across 30 major geopolitical events since 1939, and typically recovers fully within six weeks. Northeastern Global News

But here's where I'd sound a note of caution. This resilience is built on one big assumption: that the conflict stays short. If the Strait of Hormuz stays blocked for months, businesses start absorbing costs they can no longer pass on, layoffs follow, consumer spending drops, and corporate earnings — the very thing holding stocks up right now — start to crack. At that point, the market's optimism becomes very hard to sustain. So yes, I think stocks will likely hold for now. But if this drags on, the disconnect between market prices and economic reality can only last so long.

The market isn't ignoring the war — it's betting the war ends soon. But bets can go wrong.

💡 Key Takeaway for Singapore Readers

Whether you're an investor, a business owner, or just someone trying to manage household expenses — don't mistake a rising stock market for a safe economy. The two can move in opposite directions for longer than feels comfortable. Keep an eye on oil prices and the Strait of Hormuz situation; for Singapore, that's the real leading indicator of what's coming to our cost of living and business operating costs. If you're investing, avoid making panic decisions — but also don't let market highs lull you into ignoring the underlying risks building up.