Ed Yardeni and Tom Lee say markets have overreacted
Oil is close to $100 a barrel as U.S. equities are falling.
As the war in Iran escalates again, strategists at both Yardeni Research and Fundstrat say the decline in U.S. stocks is presenting an opportunity to buy the dip.
As of Friday, the U.S. had completed its 13th night of attacks against Iran, pushing prospects of de-escalation further into the future, sending oil prices (BRN00) (CL.1) close to $100 a barrel. In addition, President Donald Trump told Axios on Thursday that he's considering a "massive attack" on Iran.
With oil rising, U.S. equities have fallen. The S&P 500 SPX shed 1.2% during Thursday's session, bringing it slightly below its 50-day moving average. S&P 500 futures (ES00) indicated a small rebound was in store for Friday as oil prices eased.
Ed Yardeni, economist and president of Yardeni Research, appeared broadly unfazed by Thursday's pullback.
"The relative calm in the S&P 500 suggests that investors have learned that geopolitical crises have usually been good buying opportunities," he told clients in a note on Thursday. "It should be so again."
Buyers of the stock-market dip will now be betting that either Washington or Tehran will move to end this conflict, he said.
The investment research firm recommends increasing exposure to the energy sector as a hedge against a potentially longer-than-expected war in Iran, noting how those remained strong during the temporary ceasefire and are currently rising alongside oil. The Vanguard Energy exchange-traded fund VDE is up 19% since the start of the conflict in the Middle East.
Yardeni also advised buying financial services, healthcare and industrial stocks.
Also encouraging investors to buy stocks after the pullback was Tom Lee, head of research at financial research boutique Fundstrat. He said the stock market was reacting to both the fresh rounds of strikes in Iran and disappointment over big tech's earnings results so far, in a note to clients on Thursday.
The Magnificent Seven stocks - Alphabet$(GOOGL)$, Amazon (AMZN), Apple $(AAPL)$ , Meta $(META)$, Microsoft $(MSFT)$, Nvidia (NVDA) and Tesla $(TSLA)$ - saw its largest one-day market capitalization decline since the week of "Liberation Day" tariffs in April of last year of $889.3 billion on Thursday, according to Dow Jones Market Datat. Those losses came after Alphabet and Tesla announced plans for large boosts in capital expenditure.
"In our view, equity markets are overreacting to both developments," Lee said, adding that stocks tend to respond quickly to developments in conflicts because of uncertainty.
"But these periods of risk-off have been buying opportunities in the past, and we expect this to be the case again," he wrote. The S&P 500 slipped 10% during the first wave of U.S.-led strikes against Iran earlier in the year, but that was followed by a significant V-shaped rally, Fundstrat found.
As a major oil producer, the war is ultimately likely to be a benefit to the U.S. economy, when compared with other countries, Lee said. "So, I would urge investors to not derisk simply because war risks are rising."
-Nora Redmond
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(END) Dow Jones Newswires
July 24, 2026 06:09 ET (10:09 GMT)
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