Tel Aviv Stocks at Record Highs Signal Investor Optimism Amid Crisis
Despite rising tensions in the Middle East, markets appear surprisingly calm. Oil futures briefly dipped, stock futures rose, and even gold—a traditional safe haven—lost some shine. This measured response, according to Ed Yardeni of Yardeni Research, suggests investors believe the conflict may soon de-escalate.
Yardeni’s view centers on Iran’s next move. “Our bet is they will sue for peace,” he says, arguing that significant retaliation is unlikely. Should Iran choose diplomacy, he expects oil prices to decline and global stocks to rally. Gold might slip, but Yardeni views any drop as a long-term buying opportunity given central banks’ ongoing interest in the metal.
Perhaps the most telling market signal comes from Israel itself. The Tel Aviv stock exchange, tracked by the Israel MSCI Index, has surged to a record high—an indicator that investors are pricing in a future with less regional conflict.
“Forecasting the Middle East is risky,” Yardeni cautions. “But Israel’s market suggests we may be witnessing a profound shift now that Iran has been de-nuked.”
Yardeni is hopeful the Trump administration could build on the 2020 Abraham Accords—potentially drawing in Saudi Arabia and other Arab states—to further stabilize the region. His ideal scenario includes regime change in Iran, with new leadership focused on economic growth rather than hostility.
Still, he acknowledges more dangerous outcomes are possible: a military dictatorship or a prolonged conflict that disrupts global oil supply, possibly triggering a recession.
Yet for markets, Yardeni’s base case remains bullish. He believes the S&P 500’s rally, which began in October 2022, is still on track, targeting 6,500 by year-end and 10,000 by the decade’s close. He also sees the recent U.S. strike on Iran as a reassertion of American military deterrence, reinforcing Trump’s “peace through strength” stance and supporting what Yardeni calls the “Roaring 2020s” outlook.
On the earnings front, there’s more good news. S&P 500 forward earnings estimates have climbed to record highs for the third straight week, with analysts brushing off concerns that tariffs will meaningfully dent profits.
