By Martin Baccardax
U.S. stock futures were edging cautiously higher Tuesday and the S&P 500 was close to reclaiming a key performance benchmark as investors look to, and possibly through, yet another deadline in the war with Iran from President Donald Trump.
Gaming out the president's Iran war strategy or his negotiating tactics across a host of issues over the past year are nothing new for investors. In fact, markets appear to have somewhat isolated his latest round of threats and deadlines by taking stocks firmly higher over the past week.
The S&P 500 has gained more than 4.2% since the lows of March 30, including an advance Monday of 0.44%. The benchmark index now sits just 25 points south of its 200-day moving average heading into the start of Tuesday's session.
Reclaiming that level, a key indicator of future performance, might end up being a more important factor for the market heading into the spring than the president's 8 p.m. Eastern time deadline for Iran to accept a cease-fire deal and reopen the Strait of Hormuz.
"The question every investor is asking themselves seems to be why we haven't sold off harder, or had anything remotely close to a 'capitulation' day after 5 weeks of Hormuz being effectively closed," said Tavis McCourt, institutional equity strategist at Raymond James. "I'm as surprised as anyone, but my best guess is very strong economic momentum in early 2026, and an oil curve that is soothing credit and equity markets."
McCourt is referring to oil futures prices that show falling prices further into the summer and autumn months, in contrast with immediate delivery prices that remain firmly north of $110 a barrel. That suggests investors see easing supply conditions once the heated rhetoric and military strikes from both sides abates.
Still, the S&P 500's resilience has been remarkable. The benchmark fell as much as 9.1% from its late January peak to last week's low, narrowing avoiding correction territory, and many on Wall Street expect it to rally hard into the end of the year, with consensus price target estimates for the S&P 500 in the region of 7700.
Earnings growth is a big component of that bet. Analysts are looking for collective S&P 500 company profits to rise 14% over the first quarter and nearly 19% for the year, paced by megacap tech giants and the country's biggest banks.
Stocks are also cheaper as a result of the pullback, with the S&P 500's forward price-to-earnings multiple falling by around 17% since late January, and now pegged just under 20 times even as earnings forecasts have improved.
"While we can't rule out a re-test if the Iran conflict escalates further or bond yields and/or bond volatility push higher again, we don't see a meaningful break of last week's lows for the S&P 500 ahead," said Mike Wilson, Morgan Stanley's chief U.S. equity strategist.
David Lefkowitz, chief investment officer for U.S. equities at UBS, remains bullish on earnings growth and stock performance as well, but thinks the complicated connection between global oil markets and the Strait of Hormuz will take some steam out of the S&P 500's rebound over the first and second half of the year.
"The war will wind down over the coming weeks, allowing energy flows to gradually resume," he said in a note published Tuesday. "Nonetheless, restoring oil production to pre-conflict levels will take longer, given damage to infrastructure and the time required to bring capacity fully back online."
Elevated oil prices, he argues, will weigh on U.S. growth prospects while stoking inflation concerns, keeping the Federal Reserve in "wait and see" mode in terms of delivering a rate cut.
"As a result, we trim our S&P 500 price targets," Lefkowitz said. "Our June 2026 target declines from 7300 to 7000, and our December 2026 target falls from 7700 to 7500."
The latter still represents an impressive 13.4% advance from current levels, and would mark a fourth consecutive year of double-digit gains for the year.
That could mean that while Trump remains the single determinant in ending the U.S. war with Iran, his influence on stock markets may have waned in the wake of his shifting deadlines.
Write to Martin Baccardax at martin.baccardax@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 07, 2026 06:13 ET (10:13 GMT)
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