The stock market isn’t ignoring Iran. It’s rising for these three very real

The U.S.-Iran war drags on with no sign yet of a peace deal. Someone needs to tell the stock market.

After a small early drawdown near the outset of the war, the S&P 500 has rebounded to all-time highs, closing above 7,400 on Monday for the first time ever even as oil prices remain at elevated levels.

Some say the equity market is ignoring the coming impact of the war, fueled by speculative activity. But it’s more than that.

There are very real fundamental reasons for the comeback, including an economy much less reliant on oil to power it, strong company margins with energy costs as just a small input and tech companies whose businesses are insulated from the impact powering S&P 500 earnings forward.

The index has made short work of recovering from its March low, having rebounded roughly 17% from around 6,300 in just a little over a month.

When the U.S. first struck Tehran on Feb. 28, the S&P 500 slid only about 8% peak to trough. In other words, it didn’t even fall into a correction — defined as a fall greater than 10% and less than 20% — that theoretically would follow an energy shock rippling through the global economy.

At its height, since the conflict started, oil has climbed above $120 a barrel, and was last above $100. Gas prices have surged above $4.50 a gallon at the pump, and is above $5 in many states.

Many investors chalked up the market’s resilience to duration, meaning a hope that companies can navigate supply chain disruptions from the blockage of the Strait of Hormuz so long as they are temporary, and not so severe.

But with stocks rallying even with the U.S.-Iran conflict in its third month, it’s time to take a look at more constructive explanations.

Here are some of them:

Low company impact

Even if the Strait of Hormuz reopens tomorrow, the damage has already been done. Experts in the field expect that it would take weeks for ships coming out of the oil passage to reach destinations in North America, Europe or East Asia. And even after they’ve done so, higher oil prices aren’t expected to return to where they were before the crisis, meaning businesses and consumers around the world will be dealing with greater pricing pressures for some time.

But when it comes to the U.S. market, many companies won’t be much affected by the change, at least according to their latest earnings calls. A Trivariate Research review of 1,465 earnings transcripts since the start of March found that only 10% of the entire market cap of the U.S. equity market expect a negative or even mixed impact from the U.S.-Iran war. The firm said that that 10% approximation is, if anything, an overestimation.

For investors, what that means is that the S&P 500 could continue to do well, even if certain parts of the market suffer. Trivariate Research is especially wary of the consumer…