The S&P 500 just hit 7,000 for the first time ever, and Wall Street’s acting like the war is over. Spoiler alert: it’s not. But hey, who needs facts when you’ve got hope, right?
Here’s the vibe: Investors are collectively deciding that the Iran situation is yesterday’s news. Ed Yardeni, president of Yardeni Research, basically said “the war is over until further notice”—which is a hilariously honest way of saying “we’re choosing to ignore it.” The market’s up, champagne’s flowing, and everyone’s pretending the Strait of Hormuz isn’t still a complete mess.
But Craig Johnson from Piper Sandler is the friend at the party pointing out the smoke detector’s going off. He called this week’s rally “falling upwards” and said it’s “built on hope rather than evidence.” Translation: we’re vibing on fumes.
Here’s the actual problem: Oil flows through the Strait of Hormuz are down 90% from normal levels. Ninety. Percent. Goldman Sachs is basically saying “yeah, that’s not coming back anytime soon,” especially since the U.S. blockade is making it even harder for Iranian tankers to move anything. It’s like trying to run a business with 90% of your supply chain on pause.
The International Energy Agency is so concerned they cut their oil demand forecast—predicting the sharpest decline since COVID. And their director, Fatih Birol, straight-up said oil prices aren’t reflecting how bad this actually is. When oil was at $100 a barrel, he was like “nope, still too cheap.” It’s since fallen to around $90, but that’s still way above pre-war levels.
So what’s the real threat? Inflation, baby. And not the fun kind. If oil stays elevated, inflation stays sticky. And if inflation stays sticky, the Federal Reserve can’t cut interest rates like everyone’s hoping. Worst case? They might even raise rates. That’s the nightmare scenario that could turn this record-breaking rally into a very expensive lesson about counting chickens before they hatch.
The market’s basically betting that either the war ends tomorrow or we all just collectively agree to stop caring about energy security. One of those seems more likely than the other, but hey, stranger things have happened in 2026.
Bottom line: Yes, the S&P 500 is crushing it. But it’s doing it while standing on a foundation of “maybe this all works out.” That’s not a strategy—that’s a prayer. And prayers don’t pay dividends when oil shocks hit your portfolio.
