effects

The benchmark US equity indices surged to new territory entering price discovery, reflecting a market that appears to be looking past immediate geopolitical risks in favour of potential de-escalation and corporate strength.

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On Wednesday the S&P 500 closed 0.8% higher at 7,022 points, up on the day and surpassing its previous peak from January of this year.

The S&P 500 is now 11% higher since it bottomed on 30 March and after it first dropped 9% during last month.

The Nasdaq Composite also posted a record, rising 1.6% to over 24,000 points while the Dow Jones Industrial Average edged 0.15% lower and continues significantly below its all-time high.

The advance comes despite persistent headwinds.

Shipping through the Strait of Hormuz, a critical chokepoint for roughly one-fifth of the global oil supply, has been severely disrupted since late February following Iranian actions and a subsequent US naval blockade.

Traffic has dropped sharply, with Iran declaring the strait closed to vessels linked to the US, Israel and their allies.

The US Central Command also confirmed its blockade of Iranian ports took full effect earlier this week, stating that “ten vessels have now been turned around and ZERO ships have broken through since the start of the US blockade on Monday”.

Oil prices, while easing in the last two weeks, remain elevated.

At the time of writing, Brent crude stands at around $96.5 per barrel and WTI at $92.5, still well above pre-war levels and contributing to inflationary concerns.

The International Monetary Fund has responded by lowering its global growth outlook. In its latest World Economic Outlook, released on Monday, the IMF cut the 2026 forecast to 3.1% from 3.3% previously projected, citing energy price spikes and supply disruptions.

Headline inflation is now seen at 4.4% for the year, under a reference scenario assuming a short-lived conflict, with risks of even weaker growth and higher prices if tensions escalate and prolong.

The modest decline in energy prices followed reports that the two-week ceasefire is holding and that fresh talks between the US and Iran could resume soon.

US President Donald Trump also indicated that negotiations for lasting peace might restart by the end of the week.

Investors appear to be pricing in an eventual reopening of the Strait of Hormuz and a contained negative impact of the war in general.

Speaking to Euronews, Alan McIntosh, chief investment officer of Quilter Cheviot Europe, explained that “although the first round of talks led to no agreement, a likely extension of the ceasefire gives optimism that an early resolution can be reached”.

“Assuming a fairly swift end to hostilities and a resumption of oil shipments, the economic damage to global inflation and growth should be fairly limited,” he added.

Why US indices defy the odds

Analysts point to several factors behind the market resilience.

Hopes of a swift end to hostilities have encouraged risk-taking, while corporate America is showing strength. Bank executives highlighted a strong US consumer and a healthy pipeline for deals and initial public offerings.

Earnings expectations for the first quarter have been revised higher, with S&P 500 companies now forecast to report combined profits of over $605 billion (€513bn), up from earlier estimates.

Tech shares, particularly those linked to AI, provided additional support. The Nasdaq’s outsized gain reflected renewed enthusiasm for growth-oriented stocks even as broader economic projections softened.

McIntosh told Euronews that “the capital spending boost relating to AI shows no sign of slowing down so this continues to support US economic growth. We have just started the US quarterly results season and so far there is limited evidence of a negative impact from the current Middle East conflict”.

The indices also include defence companies that have all performed well with the war in the backdrop pushing governments, in particular the US, to increase military budgets.

History also offers context for the current rebound. In past US-involved wars, equity markets have frequently experienced short-term volatility followed by recovery and gains.

During the 2003 Iraq War, for example, the S&P 500 rose over 25% in the first full year after the invasion began.

The Gulf War of 1990-1991 saw an initial 11% decline in the index, but a strong relief rally followed the swift coalition victory, delivering positive returns in the subsequent year.

Similar patterns emerged in the Korean War and Vietnam War eras, where stocks posted solid long-term advances despite prolonged uncertainty.

Data compiled by the Royal Bank of Canada and other sources indicate that, across multiple conflicts, equities rose in the first year of hostilities around 60% of the time.

Markets have tended to focus on eventual outcomes rather than immediate shocks, rewarding resolution and economic adaptability. The latest record for the S&P 500 and the Nasdaq underscore this enduring pattern.

While risks remain if the Iran conflict worsens, investors are currently betting that diplomacy and corporate fundamentals will prevail.

WASHINGTON — The big election over the weekend was in a small European country nearly half a world away from Washington, but the defeat of Hungarian Prime Minister Viktor Orbán has significant reverberations in the United States.

That’s because President Trump and many U.S. conservatives have long embraced Orbán, who has become an icon among the global right for his anti-immigrant stance. The American president’s agenda has striking parallels with the way the Hungarian leader used the levers of government to tilt the media, judiciary and electoral system to keep his party in power for 16 years.

Trump supported Orbán’s reelection bid and even dispatched Vice President JD Vance to Budapest last week — in the midst of the Iran war — to stump for the incumbent.

Orbán’s loss was a reminder of how the war has diminished Trump’s ability to help allied politicians overseas, as well as of the limited ability of leaders to use their power to tilt voting in their direction in an age of worldwide discontent over incumbents of all ideological stripes.

“Oppositions can win despite a tilted playing field,” said Steven Levitsky, a politics professor at Harvard and coauthor of the book “How Democracies Die.” “Democracies are facing many challenges in many parts of the world, but so are autocracies.”

Orbán’s defeat has immediate global implications because he was the European leader closest to Russian President Vladimir Putin and had blocked European Union aid to Ukraine, which is defending itself after Russian’s 2022 invasion.

His fall was celebrated on Sunday by both Democrats and Republicans, some of whom criticized their own administration for such overt support for the Hungarian leader.

“Don’t fiddle-paddle in other democracies’ elections,” Republican Rep. Don Bacon of Nebraska said on the social media site X.

“The freedom-loving people of Hungary have voted decisively in favor of democracy and the rule of law,” posted Republican Sen. Roger Wicker of Mississippi.

Matt Schlapp, chairman of the American Conservative Union, is part of the wing of the American right that embraced Orbán. The Conservative Political Action Conference, which Schlapp’s group hosts, held its first European session in Budapest and has made Hungary a regular destination.

Orbán was a featured speaker at the group’s conference in Dallas in 2022.

Schlapp said there’s an easy explanation for Orbán’s loss.

“Eventually, democracies just want change,” he said. “In democracies, you don’t have kings, and the people in the end speak.”

“The people of Hungary were saying, ‘We’re having a difficult time with inflation, the economy and the war. Let’s try the new guy,’” Schlapp said, noting that he backs Trump’s Iran war but the turmoil it’s created, especially in European energy markets, hurt Orbán.

Diana Sosoaca, a far-right member of the European Parliament from Romania, on Sunday called Vance’s Hungarian visit “a big mistake” given widespread revulsion at the Iran war on the continent.

“You invite a representative of the United States of America, who created the big disorder in this world?” Sosoaca said in an interview posted by the Kremlin-controlled network RT, formerly known as Russia Today. “It was the biggest mistake he could do before the elections.”

How Orbán consolidated power

An anti-communist activist in his youth, Orbán was initially elected prime minister in 1998 but took a turn to the right after being voted out in 2002. Upon returning to office in 2010, Orbán and his Fidesz party implemented a legal framework to consolidate authority that he and his allies developed while he was out of power.

Orbán embraced what he dubbed “illiberal democracy,” building a barrier on Hungary’s southern border to block migrants from Africa and Asia who were moving northward through Europe. He and his party stifled LGBTQ+ rights, cracked down on freedom of the press and undermined judicial independence.

Orbán cemented his power when his Fidesz party won enough seats in Parliament during the 2010 global recession to rewrite the country’s constitution. They restructured the judiciary to funnel appointments to the bench through party loyalists, redrew legislative districts to make it much harder for Fidesz members to lose elections and helped push Hungary’s media companies to be sold to tycoons allied with Orban.

The European Union has declared Hungary an “electoral autocracy.”

Orbán backers have scoffed at suggestions that the Hungarian leader is an enemy of democracy, and on Sunday he quickly conceded his loss. Democrats have worried that Trump will try to use his own executive power to tilt November’s midterm elections or the 2028 presidential vote to his party, much as Trump tried to use his official powers to overturn Democrat Joe Biden’s win in the 2020 presidential election.

“Most importantly for American voters, even a guy who rigs the system can be defeated when the people unite and turn out against him,” said Ian Bassin of Protect Democracy, a nonpartisan group that says it combats authoritarianism.

Democrats weigh in

Democratic Rep. Ro Khanna of California took the opportunity to jab at Vance: “Your ally Orban conceded. In 2028, will you @JDVance follow suit if you lose?” he posted on X.

Levitsky said defenders of democracy shouldn’t take too much comfort from Orbán’s loss, noting that in some ways Trump has been more oppressive. He cited Trump’s use of the Justice Department to investigate political opponents and the shooting deaths of protesters by immigration officers — steps that Orban’s government never took, Levitsky said.

But Sen. Chris Van Hollen, a Maryland Democrat, said he sees parallels between Trump’s and Orban’s political projects, as well as the potential fate of their parties at the polls.

“He was essentially doing what Donald Trump is trying to do here in the United States,” Van Hollen said of Orban. “My read of the election is that the people of Hungary rejected that, just like people in the United States are rejecting that here at home.”

Trump made no public comments Sunday about the election results in Hungary.

Riccardi and Brown write for the Associated Press. Riccardi reported from Denver.