By Hannah Erin Lang and David Uberti
Days after the U.S. and Israel attack on Iran, Anthony Reid was at home in Dallas wondering whether a doomsday energy shock for the global economy was precisely the time to make a big bet.
Reid stared at his phone and considered plowing a chunk of his savings into shares of Robinhood. He had reasons to hold off. First of all, it would be a lot of money for a 30-year-old Amazon delivery driver new to investing. Second, a historic oil disruption from a war in Iran could turbocharge inflation and hammer stocks.
Reid, the father of two boys, had also heard that the best time to invest was when others were scared off. "F -- it," he recalled thinking, and clicked "buy."
There are times when bad news is bad news for markets. There are times when bad news is good news for markets. Then there are times like this -- when bad news doesn't even register for investors, including Reid.
From day traders to hedge funds, investors are once again running full-speed into stocks and loading up on risk. A skeptic could find plenty cause for gloom: Oil tankers still can't freely traverse the Strait of Hormuz. The two sides were still trading threats when the next round of U.S.-Iran peace talks was put on pause. President Trump said Tuesday he would extend the cease-fire, but the U.S. would continue to blockade Iranian ports.
Yet the three major U.S. stock indexes have marched back to prewar levels and then some. The tech industry's Magnificent 7 gained $2.5 trillion in market value over a recent eight-day stretch. Speculative bets are back. Allbirds, the onetime footwear favorite of techno optimists in the 2010s, gained almost 600% in one day last week after pivoting to -- what else? -- AI.
Doubters warn that markets are increasingly driven by you-only-live-once bets and momentum-chasing algorithms, and, as a result, are getting dislocated from reality -- or at least oblivious to bad news. A flood of information has left even the biggest traders struggling to parse fact from fiction. At the same time, Wall Street is confident that markets are a constraint on Trump -- that he will do what he needs to reverse a selloff, even if that means walking back a social post from the day before.
Grizzled investors say the run-up merely confirms the age-old wisdom of keeping money in markets through turbulence. Near-term threats pale in comparison to a U.S. economy that has weathered crisis after crisis in recent years, often with help from Washington. America's massive oil and gas output also shields the U.S. economy from the shocks that boosted inflation and slowed growth in the 1970s.
The market's current leap to new records reflects the same impulse to buy the dip that propelled stocks during the Covid-19 pandemic and last year's tariff turmoil. Four of the S&P 500's five biggest daily gains of this year have come during the war.
For many traders, including Reid, when stocks go down, it is time to buy more stocks. After sliding for much of March, Reid's Robinhood shares surged 31% in a single week. If stocks fell again, he said, "I would dump more money into the market."
It is a risky game. Even after peace prevails, and ship traffic resumes through the Persian Gulf, many analysts believe energy prices will be higher for the rest of the year, and that a new era of conflict and economic nationalism could plague markets beyond that.
"We're not smart enough to know if that's going to happen or if it's not going to happen," said Matthew McLennan, a portfolio manager at First Eagle Investments. "But it is apparent to me that markets aren't worried about that right now."
War of words
Sean Lambert, global head of DV Commodities, one of the largest oil-derivatives traders in the world, noticed taco emojis piling up -- roughly 100 in six weeks -- in an internal Slack channel where his team tries to keep up with a fire hose of news. It is a nod to the dynamic even seasoned traders say matters most: the idea that Trump backs off his harshest plans, also known as "Trump Always Chickens Out," the TACO trade.
After the U.S. and Israel struck Iran in late February, stocks' wild swings took their cues from the oil market. Prices became an extension of the battle between a White House trying to tamp down energy costs and an Iranian regime attempting to do the opposite. Officials on both sides wage information warfare with conflicting social-media posts.
At the Manhattan office of DV Commodities, not far from West Village dining spots, long days have blurred together for traders at desks bathed in the light of six computer screens. Millions can ride on price swings of derivatives linked to the globe-spanning supply chains for oil, fuel, natural gas and more. Lambert can see the impact on his team's profits and losses flickering in real-time on his phone.
A frenzied 31% run-up in oil prices after futures markets opened one Sunday night amounted to a bigger move in a matter of hours than traders might see in many years. A Trump post or cease-fire news have occasionally sent prices plunging, sometimes providing easy trading opportunities for DV. "Even when things are working in your favor, it still feels uncomfortable," Lambert said.
When trading, "it doesn't matter if something is real or fake," he said. "Whatever the price is doing, that's your main input. Real and fake in terms of information, who knows?"
Oil traders tend to thrive in volatility that upends markets and threatens economies overnight. But that same uncertainty has left even investors far afield of the energy industry parsing feeds of oil-tanker traffic and U.S. troop movements. One research firm even sent an analyst -- armed with cash and Cuban cigars -- to see the Strait of Hormuz up close.
"We've probably ingested more third-party qualitative analysis in the last six weeks than we have in our entire history, combined," Lambert said. "You have to understand what everyone else is thinking."
That has contributed to a dynamic where momentum is hard to bet against, even though ship traffic through the strait remains at a trickle, and oil stockpiles around the world are quickly falling. As prices retreated last week during the cease-fire between Washington and Tehran, Lambert said liquidity and trading volumes also fell, an apparent pullback from risk and a sign of market fatigue.
"We go into the end of last week and everyone decides everything is back to normal again," he said, "even though we're putting a bunch of highly reactive elements into a bottle and shaking them up."
Benchmark global oil futures jumped 9% this week, to $98.48 a barrel, while peace talks were in limbo.
High emotion
Wall Street traders learned an important lesson when Trump's tariff policies briefly upended global markets last year, dragging equities to double-digit losses in a matter of days.
Some, like Alonso Munoz, the chief investment officer at Hamilton Capital Partners, viewed it as a clearance sale and bought up stock. He scored big when Trump reversed his tariff stance and the markets ripped.
Munoz saw the same dynamic developing in the Iran war. On a Monday in mid-March, he stared out at the Manhattan skyline from his office on the 85th floor and decided he didn't want to miss out on another blistering rally. "This feels like Liberation Day," he told clients.
His firm snapped up tens of millions of dollars worth of stocks, including Tesla, Amazon and Oracle. "This administration is willing to pivot when the market gets shaky," Munoz said. "There was just no way they were going to let this market get into trouble."
As Trump's rhetoric effectively beat down short-term surges in oil, investors came to live with the prospect of higher-for-longer energy costs, even as consumer surveys showed a plunge in the economic outlook of Americans. Big banks reported blockbuster earnings this month, and Wall Street's top executives signaled the show would go on.
After all three major U.S. indexes fell more than 7% from the start of the war, pushing the Dow and Nasdaq into correction territory, they have since boomeranged higher than when the drones and missiles started flying. Fuel-hungry transportation stocks bounced in a sign of growing industrial output. Beleaguered software shares and private-credit firms rebounded.
When the rally kicked off in recent days, data indicated it was more about technical trading strategies than confidence that the war was ending. Hedge funds, which had bet against the market as volatility climbed, started rapidly unwinding those short positions by buying up shares.
There is an old Wall Street saying that nothing changes sentiment like price, and soon the rally was gaining steam. Professional investors grew more optimistic, buoyed by the approach of first-quarter earnings season: analysts were still projecting double-digit profit growth, making cheaper shares look like a bargain. Trend-following hedge funds went on a buying spree, adding to the momentum.
"The past six weeks have been a master class in how emotions and crowd behavior can drive breathtaking market swings," said Mark Hackett, chief market strategist for Nationwide. "Technical rallies have their limitations, and a shift in investor attention to fundamentals is needed to sustain the rally."
Munoz says his investors seemed less troubled by the swings than before. As stocks fell during the end of March, his phone remained surprisingly silent.
"Clients have gotten used to these sharp dips," he said.
Some investors relish them. When Danner Drake, 54, saw news of the Nasdaq correction flash on his office computer on March 26, he opened his brokerage app.
Almost reflexively, the Alabama-based civil engineer sold roughly 10% of his holdings in a plain-vanilla index fund and plugged it into ProShares UltraPro QQQ, a leveraged exchange-traded fund that promises triple the return -- positive or negative -- of the Nasdaq-100.
After tapping the brakes in March, individual investors such as Drake started buying again in April, juicing gains in popular names including Palantir, Microsoft and Robinhood. The activity echoed "the dynamics of last summer's meme stock rally," Vanda Research global macro strategist Viraj Patel wrote in a note to clients.
But Drake tries to get in early if he can -- right after major indexes suffer a steep drop. For years, it has been his strategy -- take on some leverage, wait for the bounce and collect the gains when stocks snap back.
A longtime investor who held on through the dot-com crash and the 2007-09 recession, Drake said his experience has instilled a kind of blind faith in the American stock market's ability to recover from just about any crisis.
Why are markets racing back to records? "I have no idea," he said.
"It doesn't matter why it goes down -- the Iran war, Covid, whatever," Drake said. "All these times when the market drops, it doesn't even matter to me, I buy more."
Write to Hannah Erin Lang at hannaherin.lang@wsj.com and David Uberti at david.uberti@wsj.com
(END) Dow Jones Newswires
April 21, 2026 21:00 ET (01:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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