S&P 500, Nasdaq hit new record highs as market fully recovers from Iran war losses

The S&P 500 closed at a new record high on Wednesday, marking its first record close since the start of the conflict between the United States and Iran, as investors returned to high-risk assets bolstered by hopes of de-escalation and strong earnings expectations.

The index recorded a closing level of 7,022.95 points, rising by 0.8% and surpassing its previous record close in January, according to LSEG data. It also hit an intra-day record high of 7,026.24 points.

The report noted that U.S. President Donald Trump stated that talks with Iran to end the war may resume soon, following the failure of the first round of negotiations held in Islamabad. Markets had retreated sharply last month when hostilities broke out, causing a historic shock to oil markets and reviving concerns over inflation and U.S. interest rate expectations.

The S&P 500 had declined by as much as 9% after the conflict erupted on February 28, stopping just short of the traditional 10% correction level. However, both the Nasdaq Composite and the Dow Jones Industrial Average did reach correction territory (10%) during the sell-off.

Markets received support from strong corporate earnings outlooks. Executives at major banks reported that the American consumer remains resilient despite the oil price shock, and that deal activity and initial public offerings remain robust.

According to LSEG data, S&P 500 companies are expected to generate total profits of $605.1 billion during the first quarter of the year, compared to estimates of $598.7 billion at the start of the quarter.

Several financial institutions viewed the previous decline as an opportunity to buy stocks at lower prices, despite the continued risks of geopolitical escalation, which could test market confidence if renewed.

Analysts warned that even if geopolitical risks recede, pre-war concerns could return to the forefront, particularly those related to the impact of artificial intelligence.

Private credit firms also face increasing pressure due to the risk of investors withdrawing funds amid general market anxiety.

Jeff Schulze, head of economic and market strategy at ClearBridge Investments, said: “Markets rarely wait for full information. Despite continued uncertainty regarding energy disruptions, they see risks receding and the most likely trend is upward.”

He added that the current earnings season has “started well so far.”

Bank of America shares rose following the announcement of first-quarter profit growth, and Morgan Stanley shares climbed after strong results bolstered the financial sector of the S&P 500.

According to preliminary data, the S&P 500 rose by 54.83 points, or 0.79%, to close at 7,022.21 points, while the Nasdaq Composite jumped 375.34 points, or 1.59%, to reach 24,014.43 points. In contrast, the Dow Jones Industrial Average fell by 75.44 points, or 0.16%, to close at 48,460.55 points.

The Volatility Index (VIX) dropped to its lowest level since February 26, reflecting a decline in demand for risk hedging.

The technology sector in the S&P 500 performed strongly, supported by a rise in software stocks, while the industrials and basic materials sectors lagged behind.