Financial markets are displaying marked differences in performance as the conflict in the Middle East moves into its eighth week. U.S. equities have erased the wartime decline, yet oil remains at levels that are keeping bond yields higher and pressuring gold. The pattern is uneven across regions, with major commodity exporters outperforming while smaller, energy-dependent economies falter.
Stocks: a rapid return to pre-conflict territory
The S&P 500 benchmark has bounced back to the levels seen before the onset of hostilities. From a March 30 low, the index rallied about 9%, closing Monday at 6,886.24, a point above its February 27 finish just ahead of U.S. and Israeli airstrikes in Iran. Recent hopes for renewed negotiations following last week’s ceasefire have supported the recovery. In addition, Citi have shifted to a bullish stance on U.S. shares, citing expectations for resilient corporate earnings with technology singled out for particular strength.
The speed of the rebound is notable after a sharp sell-off in March. That month marked the index’s biggest monthly fall since April 2025’s tariff turmoil. Volatility, which spiked last month with the VIX reaching a more than 10-month high, has fallen back to pre-war readings. The drop in market turbulence has been advantageous for brokerage businesses; first-quarter results at Goldman Sachs and JPMorgan benefited from greater trading income tied to that spike in volatility.
Oil: still elevated, with a costly near-term market
Crude prices have eased from March peaks but remain elevated at around $100 a barrel, roughly 40% above late-February levels. The immediate physical market appears more strained: refiners have been paying north of $140 a barrel for North Sea crude for near-term delivery, nearly double the pre-war price. Forward markets indicate traders expect some easing later in the year, with Brent futures for delivery later this year pointing to roughly $83 a barrel. Nonetheless, even those contracts sit meaningfully above pre-February 28 pricing. Futures maturing in December and in March 2027 are both about 21% higher than before the conflict.
Portfolio manager Markus Hansen of Vontobel said that while the U.S. can manage an oil shock of this duration, Asia is more exposed. Hansen added he has been using the selloff to acquire cheaper equities, but warned higher oil will likely delay central bank rate cuts.
Bonds: yields lift as energy-driven inflation risks persist
High energy costs have produced a contrasting picture in fixed income markets. Borrowing costs across major economies are elevated compared with levels before the war. Investors point to the persistence of higher-for-longer energy prices as a source of inflationary pressure that has kept central banks on a firmer stance than before hostilities began.
In the United States the two-year Treasury yield is roughly 40 basis points above late-February levels, trading at about 3.76% after easing from March peaks. In Britain the two-year yield has risen around 75 basis points since the pre-war period. These moves signal markets pricing a slower path to policy easing than had been expected prior to the conflict.
Gold and currencies: mixed moves
Gold, commonly seen as a safe-haven, has struggled to hold gains and sits nearly 10% below pre-war levels. Analysts attribute this retreat in part to profit-taking during March, when investors reportedly tapped top-performing assets to offset losses elsewhere.
The U.S. dollar is largely back where it stood before hostilities, with the dollar index - which tracks the currency against six peers - only slightly above its February 27 close. The greenback’s earlier post-war gains of about 3% have been mostly given back as markets increasingly focus on prospects for a resolution that could limit economic fallout. Differences in central bank expectations are also affecting exchange rates: investors are pricing in potential rate moves in Europe and Britain but not in the United States, supporting the euro and the pound. The euro is trading near $1.18, having recovered almost all recent losses, and the pound is back around $1.136.
Regional divergence: exporters versus importers
The performance split between regions is pronounced. Europe, which relies heavily on imports for its energy needs, has lagged. The STOXX 600 is down about 2.6% from pre-war levels, and Germany’s DAX, with its industrial concentration, is down roughly 5% from the same reference point. Other energy importers such as Japan and Korea have also underperformed, although their larger economies and purchasing power mean they can still secure supply even at higher prices.
Smaller, more vulnerable economies are showing acute strain. The Philippines has declared a national emergency and its relatively small equity market has fallen some 8% since the start of the conflict. By contrast, major energy exporters have generally gained. Brazil’s main stock index stands about 5% higher than before the war, and the Brazilian real has appreciated approximately 2.7% against the dollar. Norway’s krone is more than 1% stronger versus the dollar over the same interval.
China presents a particular mix. While a large oil importer, China’s substantial reserves and relatively low domestic inflation have helped attract inflows into its government bond market and have put downward pressure on yields. Chinese green energy equities have also seen strong gains.
Conclusion
Overall, the market reaction to the conflict has been far from uniform. U.S. equities have weathered the shock and returned to pre-war levels, underpinned by hopes of resumed talks and expectations for corporate resilience, especially in technology. Yet elevated oil prices continue to feed inflationary concerns, sustaining higher short-term yields and weighing on gold. Regional outcomes hinge on energy exposure: exporters have benefited while importers, particularly smaller economies with fewer buffers, face more significant economic and market stress.