S&P 500 extends winning streak despite Iran war

Three months into the Iran war, it has become all but impossible to dampen the bullish spirit driving global markets for risky assets.

Hope on Friday that a truce may be imminent capped a seven-day rally that sent the S&P 500 to its ninth straight weekly advance, the longest since 2023. Junk bonds rallied and Treasuries gained, while Brent crude settled at $92 after dropping more than 16% in May.

Read:
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Whether the mood is sustained when US futures start trading on Sunday night may depend on the fate of seemingly stalemated negotiations toward ending the war.

Exchanges of messages between Iran and the US over the text of a potential pact are still ongoing, and the two sides are proposing changes, periodically, the semi-official Tasnim news agency said without citing anyone.

It added that no agreement has been reached and it’s still possible that any deal could collapse.

“There are likely going to be more setbacks, but the market has already priced an agreement in Iran,” said Patrik Lang, chief investment strategist at Geneva-based Global Gate Asset Management. “I wouldn’t expect big market moves, except maybe lower oil, once the deal is announced.”

Over the weekend, Israel expanded its ground assault in Lebanon as Hezbollah – Iran’s most powerful regional ally – stepped up attacks on Israel’s north.

According to the Israeli military, Hezbollah fired more than 300 projectiles at its soldiers in Lebanon and at northern Israel. The escalation has shattered a truce declared after the Tehran-backed group attacked Israel in response to its war on Iran, which it launched with the US on 28 February.

Trading in US equity, Treasuries and energy futures resumes in earnest at 6pm New York time. Meanwhile, the dollar was quoted little changed against major peers as currency markets reopened for the week.

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“The market has shifted longer dollars, and finalising the US-Iran ceasefire ought to weigh on the greenback,” Barclays strategists including Themistoklis Fiotakis wrote in a note to clients.

Read: Trump’s bind deepens with Hormuz shut and hawks pushing war

On Friday, US President Donald Trump posted on social media that he was ready to make a “final determination” on a preliminary agreement to extend the ceasefire. Hours later, he left the Situation Room meeting without any decision being made, the New York Times reported.

Chip stocks surge

Offsetting war worries has been unbounded enthusiasm for sectors touched by the artificial intelligence (AI) trade.

The Philadelphia Stock Exchange Semiconductor Index, or SOX, is on pace for its best quarter ever after soaring 69% in the past two months.

Chips are the best-performing sector in the S&P 500 this year by a wide margin.

Micron Technology Inc’s shares have more than tripled this year. In Asia, SK Hynix Inc has soared 260%, and Samsung Electronics Co is up 165%.

If anything threatens the upward arc it’s the velocity of the advance itself, according to Laurent Lamagnere, deputy CEO of Alphavalue in Paris.

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“There’s a gradual realisation across the market that something’s got to give in the AI economy: there’s no way that these massive investments will pay out for every actor,” Lamagnere said. “A correction at one stage would make sense.”

Gains across risk assets owed as much to conviction over the economic and earnings picture as they do anxiety over being left behind.

Investors who have spent months doubting the rebound find themselves underexposed as the S&P 500 extends its climb from the March lows to nearly 20%, corporate-bond spreads narrow toward multi-decade lows, and bearish wagers are steadily squeezed.

Macro support

Solid reports on building permits and personal income lent support to the risk rally in recent sessions.

“We also find the market quite bullish in regards to the US macro data last week,” Lamagnere said. “We’ve missed part of the rally but we intend to remain prudent moving forward.”

The retreat from caution is clearest in the options market.

The cost of protecting against an ordinary selloff fell to its lowest since early 2025 by one measure, while the cost of insuring against a sudden crash dropped to its lowest this year. Demand for bullish calls, by contrast, has proved relentless across semiconductor stocks, underscoring how concentrated the market’s optimism remains in a narrow group of AI winners.

“AI is the hottest game in town and potentially a bubble in the making,” said Global Gate’s Lang. “But we’re in the early stages and there’s still money to be made.”

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