Why Equity Markets Keep Rising Despite Conflict | Economic Update | Deloitte Insights
Why It Matters
The rally indicates that investors are discounting geopolitical risk in favor of growth narratives, especially AI, shaping capital allocation and corporate financing strategies worldwide.
Key Takeaways
- •Ceasefire announcement sparked rapid equity rebound across major markets
- •Despite ongoing Strait of Hormuz blockage, stocks kept climbing
- •Investors bet conflict will end soon, limiting oil revenue for Iran
- •US equity surge driven by sustained AI investment optimism
- •Market resilience reflects confidence in growth outweighing geopolitical risks
Summary
In this week’s Economic Update, Deloitte chief economist Ira Kalish explains why global equity markets have continued to climb even as the Middle‑East conflict persists.
After the initial plunge when hostilities began, markets rebounded sharply following the cease‑fire announcement two weeks ago. Yet despite the Strait of Hormuz remaining closed and no US‑Iran agreement, indices in Europe, Japan and Canada have reclaimed pre‑conflict levels, while U.S. stocks have surged beyond them.
Kalish attributes the resilience to two forces: investors’ belief that the war will soon end, limiting Iran’s oil revenue, and the ongoing optimism around artificial‑intelligence investments that have been driving U.S. equity valuations.
The trend suggests that market participants are pricing geopolitical risk as temporary and are betting on growth catalysts such as AI. Companies and fund managers may therefore maintain exposure to equities, while policymakers should note that risk‑on sentiment can persist even amid unresolved conflicts.
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