U.S. stock indexes advanced sharply on Friday as a brief thaw in Middle East tensions eased concerns about oil supply disruptions, sending all three major benchmarks to record closing levels.
Iran's declaration that the Strait of Hormuz was "completely open" after a truce announcement between Israel and Lebanon pushed energy prices lower and encouraged buying across equity markets.
Market moves and session details
The S&P 500 climbed 1.2% to finish at 7,126.06, surpassing the 7,100 threshold for the first time. The Nasdaq Composite rose 1.52% to 24,468.48, marking its 13th straight winning session. The Dow Jones Industrial Average added 868.71 points, or 1.79%, to close at 49,447.43. Small-cap stocks also participated in the rally, with the Russell 2000 advancing more than 2% to a fresh high.
The jump on Friday capped a robust weekly performance for major U.S. indexes: the Dow gained 3.2%, the S&P 500 was up 4.5% and the Nasdaq appreciated 6.8% over the week.
Geopolitical developments and renewed volatility
That momentum was tested over the weekend when oil prices rebounded and global equities retreated after fresh signals of instability in the Strait of Hormuz. On Saturday, Tehran reversed its earlier statement about the strait and reaffirmed control, while Iranian forces attacked two Indian-flagged vessels. The situation escalated further when a U.S. Navy destroyer on Sunday seized an Iranian-flagged cargo ship that President Trump said had tried to evade a U.S. blockade on vessels traveling to and from Iranian ports.
Brent crude declined, falling about 5% below $95 amid the easing of immediate supply fears. S&P 500 futures moved slightly lower and European and U.K. equities also slipped as investors parsed the weekend developments.
Calendar risks and macro catalysts this week
Markets will turn attention to several key events this week. Kevin Warsh, President Trump’s nominee to lead the Federal Reserve, is scheduled to appear before Congress for a confirmation hearing on Tuesday - a development that could influence expectations for the path of interest rates. Also on Tuesday, March retail sales data will be released and could offer insight into the economic impact of the regional conflict.
Corporate reporting season ramps up
Investors are entering a busy week for corporate earnings, with nearly one-fifth of S&P 500 companies slated to report first-quarter results in the coming days. Tesla is due to report on Wednesday and will be the first of the so-called Magnificent Seven megacaps to release quarterly results. Boeing, Intel and Procter & Gamble are among other notable companies on the near-term calendar.
Strategists at Morgan Stanley project that first-quarter earnings for S&P 500 companies will rise 12% year-over-year, with sales increasing 7% over the same period. The largest tech-focused megacaps are seen as outpacing the rest of the market: the Magnificent Seven are expected to deliver 25% earnings growth in 2026 versus 11% for the remainder of the index, even as analysts begin to lift estimates for the broader group.
Morgan Stanley strategists, led by Michael Wilson, noted that price and earnings dispersion is elevated heading into the quarter and is expected to remain so during earnings season, which should allow for idiosyncratic stock moves.
Analysts' perspectives
Market strategists offered varied takes on the rally and its drivers.
- JPMorgan argued that investors should not give in to the recent wave of bearish sentiment. The firm suggested that many investors who turned negative as markets fell may need to rebuild positions, creating support for a rebound. JPMorgan cited resilient corporate earnings as a key underpinning of a positive outlook for equities.
- RBC Capital Markets pointed to valuation dynamics, noting that the S&P 500’s market-cap-weighted price-to-earnings ratio has started to rise but remains well below last fall’s highs. On a relative basis, U.S. equities versus non-U.S. equities sit roughly in line with their five-year average and slightly above the 20-year average, leaving room from a valuation perspective compared with recent peaks.
- Evercore ISI highlighted robust merger-and-acquisition activity, saying M&A has now surpassed prior highs even amid geopolitical uncertainty. Evercore ISI Strategy said improving sentiment and a yet-to-peak cycle support a year-end S&P 500 target of 7,750, while warning it is monitoring the potential for a "FOMO heat-up" as large private tech companies eye public listings in the year ahead.
- Morgan Stanley emphasized that, despite geopolitical risks, an earnings recovery is intact and being driven by positive operating leverage. The firm said its view of an early-cycle backdrop and an expanding leadership in price-to-earnings is out of consensus but remains in place.
What to watch
In the near term, traders and portfolio managers will balance the weekend's swings in energy and shipping risk against a heavy slate of corporate reports and several macro events. Elevated dispersion in price and earnings suggests the coming reporting period could produce notable individual stock moves even as the broad market attempts to digest the evolving geopolitical picture.