Why are stocks at highs with Hormuz closed and oil elevated?

Global equity markets have rebounded strongly since late March, defying persistent geopolitical risks and elevated energy prices. According to Yardeni Research, the recovery comes despite the continued disruption of the Strait of Hormuz and concerns over prolonged high oil costs.

Markets initially tumbled following military escalation involving Iran in late February, but have since surged back, with several indices approaching or reaching record highs. This rebound has puzzled analysts, given the growing risks of stagflation and potential economic slowdown if energy pressures persist.

The explanation, according to Yardeni, lies in the surprising strength of corporate earnings and the accelerating impact of technological innovation. Analysts have continued to raise forward earnings expectations globally, signaling confidence that companies can maintain profitability even under macro pressure.

A key driver behind this resilience is the expanding influence of artificial intelligence, which is helping boost efficiency and margins across industries. Markets with strong exposure to AI—particularly South Korea and Taiwan—have led the recovery, highlighting a structural shift toward tech-driven growth.

Yardeni maintains its “Go Global” strategy, favoring international equities over U.S. markets. The firm notes that valuations outside the U.S. remain relatively attractive compared to the S&P 500, offering potential upside as global growth broadens.

The ongoing rally suggests that investors are increasingly willing to look past near-term geopolitical disruptions, focusing instead on earnings strength and long-term technological transformation as the primary drivers of market performance