Global Stocks Rebound Despite Oil Shock and Hormuz Disruption
Global equity markets have staged a strong recovery since late March, even as the Strait of Hormuz remains disrupted and oil prices stay elevated. In a recent note, Yardeni Research outlined the key reasons behind this surprising market resilience.
Markets Recover After Initial Selloff
Following the escalation of tensions in late February, when the U.S. and Israel launched strikes on Iran, global markets initially sold off sharply. However, since the end of March, equities have rebounded strongly, with several major indices climbing back toward or even reaching record highs.
A Surprising Rally Amid Economic Risks
The rebound has puzzled many analysts, given the risks associated with high energy prices. Elevated oil costs typically increase the likelihood of stagflation or even recession, especially if supply disruptions persist.
Yardeni highlighted this contradiction, noting that the strength of the rally appears unexpected under such challenging macroeconomic conditions.
Earnings Strength and Innovation Drive Markets
According to Yardeni Research, the key drivers behind the recovery are resilient corporate earnings and ongoing technological innovation.
Forward earnings expectations for global equities—particularly within the All Country World ex-U.S. MSCI index—have recently climbed to record levels. This suggests that analysts are either overly optimistic or correctly anticipating continued economic strength.
The firm also pointed out that technological advancements are helping companies improve efficiency and expand profit margins, supporting overall market performance.
“Go Global” Strategy Continues to Outperform
Yardeni reaffirmed its “Go Global” investment strategy, which favors international markets over U.S. equities. This approach, first introduced late last year, has outperformed domestic-focused strategies over recent months.
Despite the rally, global markets still trade at relatively lower valuation multiples compared to the U.S., making them attractive from a long-term perspective.
Emerging Markets and AI Themes Lead the Rally
Emerging markets have been at the forefront of the recovery, with countries such as South Korea and Taiwan leading gains. Yardeni attributes this strength largely to their exposure to the artificial intelligence (AI) sector.
The firm also highlighted the performance of the EMXC ETF, which excludes China, noting that it has delivered strong returns recently.
