S&P 500 Nears Record High Amid Middle East Ceasefire Oil Gains 1.4%

The S&P 500 closed the day at 6,092, just 51 points off its all-time high of 6,144 from February. This indicates that the index is flirting with its record high, suggesting a strong performance in the U.S. equities market. The Dow Jones closed the day down about 106 points, but still higher than its mid-afternoon lows on Monday. Meanwhile, the tech-heavy Nasdaq finished up 0.3%, closing Tuesday at 19,974. It is also flirting with a return to its all-time high of 20,173 points from December 16, 2024.

Oil prices recovered from their earlier declines, rising 1.4% today, as tensions in the Middle East settled following the announcement of a ceasefire between Israel and Iran. This development has eased uncertainty for markets, as the risk of disruption to oil flows has diminished. Across the board, other macro issues from tariffs to the looming spending bill also sat in limbo, further easing uncertainty for markets.

Despite little change in the U.S. stocks on Wednesday, investors watched the markets closely. The fact that U.S. equities are not just recovering from their April rout, but rebounding to the record highs they saw before President Donald Trump’s tariff policies, indicates markets may have started readjusting to the era of increased uncertainty investors find themselves in. Overall levels of market uncertainty have declined compared to their peaks in the immediate aftermath of Trump’s on-again, off-again tariff policy.

However, market conditions have not returned to the humdrum routine that investors welcome. The many issues that could roil markets—from the Middle East, to the looming inflationary impacts of tariffs, to an unprecedented government spending bill—are in a holding pattern. Yes, they haven’t been solved but neither have they worsened.

This week started with slumps in the equities market over fears the conflict in the Middle East would disrupt oil flows. But what a difference a couple of days can make. On Wednesday oil futures were up 1.4% after falling earlier this week. Stocks also saw a similar drop earlier in the week. After Monday’s initial shock, a muted and fairly surprising reaction followed.

“The risk premium in markets lasted all of five hours,” said a portfolio manager. “I think the answer could be that markets are becoming more efficient in getting used to these geopolitical blips.” The ups and downs of the last few days pointed to a reactionary market.

“The broader point is we’ve become so short term,” he said. “It all strikes me as very cynical and short-term thinking at this point.” With choppy markets, including in intraday trading, some investors keep an eye on the long game.

For instance, several major forces are going to drive inflation higher. Key inflationary pressures such as “all the aspects of tariffs, changing supply chains, extra frictional costs” aren’t temporary but represent fundamental shifts in how the global economy operates. This is particularly concerning given the concentration of capital in growth assets and private equity that have benefited from the low-rate environment, making the entire system more vulnerable to an inflationary regime change.