Markets are trading strongly this week on hopes that the Iran war might soon be coming to an end. A fragile ceasefire has held despite peace talks collapsing, but President Trump overnight suggested conversations could resume this week.<\/p>\n
Investors are ready to hear some good news\u2014in fact, some economists are worried that they\u2019re so keen to hear about an end to the war they\u2019ll trade on optimism rather than concrete facts. Tickers across Asia are up this morning, S&P futures are hovering in hopeful territory, and markets in Europe are relatively flat (perhaps less inclined to trade on the promises of the White House).<\/p>\n
Ahead of the opening bell in New York this morning, the S&P 500 closed \u201cjust shy of a record high,\u201d Deutsche Bank\u2019s Henry Allen told clients this morning. This means the index is now up 9.8% over the past 10 sessions, he added: \u201cFor reference, that\u2019s now even faster than the bounceback after Liberation Day last year, and\u00a0we haven\u2019t seen a run of gains that quick over 10 sessions since the post-Covid bounceback in April 2020.\u201d<\/p>\n
For markets, the sooner the peace talks are finished, the better. That\u2019s when the real test begins. The consternation about Iran, after all, stems from its hold over global oil and energy supplies. Oil prices have increased because Iran borders the Strait of Hormuz, a narrow waterway in the Persian Gulf through which exports from the UAE, Qatar, Kuwait, and Iraq all flow. Some 20 million barrels of oil typically flowed through the strait every day, about 20% of global supply. Between a U.S. blockade of the Strait and threats from Iran that it has mined the area, ship captains have been unable to enter the waterway, choking off supply and sending prices spiraling.<\/p>\n
Prices have spiked in turn. U.S. energy commodities rose 21.3% in the latest CPI report<\/a>, up 19.4% over the past 12 months\u2014the majority from gasoline prices, which consumers can see clearly on every gas station forecourt.<\/p>\n Despite the headwinds, investors have behaved unusually in Trump\u2019s second term, with volatility now an accepted part of the day-to-day.<\/p>\n \u201cIt\u2019s an interesting thought exercise to go through the last 15 months of market history,\u201d Jack Manley<\/a>, a global market strategist at J.P. Morgan Asset Management, told Fortune in an exclusive interview earlier this month. Speaking ahead of the agreed ceasefire and Iran, and subsequent breakdown in talks<\/a>, Manley continued the market has had to navigate \u201cLiberation Day, the longest government shutdown in U.S. history, 100% reciprocal tariffs on China, dropping bombs on Iran at the end of last year, regime change in Venezuela, followed by what threats to Greenland, Japanese government bond market imploding, Citrini Report, AI software stocks, precious metals, and private credit\u2014and all of that is just in what, 14 months?\u201d<\/p>\n \u201cIn every instance when you\u2019ve had a headline like this, you\u2019ve gotten a jolt and the market\u2019s been off 2 or 5 or 10 or 15, almost 20% in a relatively contained period of time, it has demonstrated its resilience, which we\u2019ve seen for a very long time, and bounced back.\u201d <\/p>\n Investor behaviour<\/p>\n Speaking only a matter of weeks ago, Manley\u2019s comments came at a time when oil prices were surging as Trump vowed to continue hitting Iran. But the uncertainty of that week, followed by a near-record rally a short time later, underscores the rapid fluctuations investors and analysts are wading through. <\/p>\n The volatlity arising due to the Iran conflict is just another \u201cnotch on the belt\u201d for investors, Manley said, adding to a bedded-in sentiment of \u201cthis too shall pass.\u201d<\/p>\n \u201cIt\u2019s very, very easy to pull the plug when it feels like things are falling apart; it is almost impossible to figure out where the actual bottom is,\u201d Manley said. \u201cYou speak to investors and they can be professional investors like our clients, they can be amateur investors like my buddies, and the answer is always the same. It\u2019s like \u2018We\u2019re down this much, but we should be down more.\u2019 Anything you see between now and the mythical point that you think we\u2019re heading to is just noise.\u201d <\/p>\n