Stocks Rebound to Record Highs as Iran War Fears Ease, But Conflict Isn't Over

Global stocks have recovered losses from the Iran conflict, with major indexes now back at or above pre-war levels as investors unwind defensive positions and refocus on the AI-driven rally. The MSCI World Index, which dropped over 3% in the week after tensions escalated, has since rebounded to a record high and is now trading above early-March levels.

Analysts say the rally has been driven more by the removal of war-risk premiums than any real improvement in fundamentals. As ceasefire hopes emerged, investors quickly reversed defensive positioning, pushing equities higher. Markets have also shifted away from worst-case scenarios, such as prolonged disruption in the Strait of Hormuz, toward expectations of stabilising energy flows.

Still, the outlook remains fragile. Some gains have already been pared as peace talks show signs of strain, highlighting that the rebound may be conditional. Renewed warnings from Donald Trump have also kept geopolitical risks firmly in focus.