Less than two months after the US‑Israel clash in Iran, the S&P 500 has reclaimed record highs, snapping a late‑March dip of just under 10% from its previous peak. A two‑week ceasefire sparked a sharp rally, and despite a modest slip earlier this week, the index still sits above its pre‑war level and investors have largely shrugged off the volatility.

Valuation metrics tell a different story. Measured against earnings, the index is 5% cheaper than at the war’s outset, while analysts now project aggregate earnings growth of 18% over the next twelve months, up from 15% weeks ago, driven by tech leaders such as Nvidia outpacing forecasts. The gap between earnings optimism and price multiples suggests investors are applying discount rates amid lingering geopolitical risk.

First‑quarter results have already buoyed sentiment: major banks posted solid earnings and analysts at Bank of America praised updates from JB Hunt and Fastenal. Yet consumer confidence has slipped sharply since the conflict began, and any stumble by AI hyperscalers could reverse the rally. As long as earnings growth stays ahead of price adjustments, the index’s record highs remain justified.