US stocks have been in rather volatile in recessions sessions amidst rising tensions between Israel and Iran, particularly because the latter plays a central role in the global oil supply chain.
Still, “Big Short” investor Steve Eisman, who currently hosts “The Real Eisman Playbook” podcast, says the Israel-Iran conflict could prove “unbelievably positive” for financial markets.
Note that the benchmark S&P 500 index is already up more than 20% versus its year-to-date low at the time of writing.
Why is the Israel-Iran conflict a positive for markets?
Steve Eisman dubs the attack on Iran a positive for global markets since before the flare-up, the West Asian country was nearing nuclear status – a development that he said would have triggered a dangerous, regional arms race.
But now, with the regime pushed back, the looming nuclear threat has temporarily receded. In an interview with CNBC this morning, Eisman explained:
Iran is run by a death cult … and getting rid of a death cult anywhere on planet Earth … especially when that death cult is close to getting nuclear weapons, I think is a very positive thing.
Following an initial decline in US stocks in the wake of the Israel-Iran conflict, markets are starting to stabilise, which Eisman believes reflects investors are recalibrating, beginning to factor in the long-term geostrategic relief from a de-nuclearized Iran.
Eisman says tariffs have power to set US stocks
According to Steve Eisman, what he’s currently focusing on and what has more power to set the direction for the S&P 500 is the Trump administration’s tariff policy.
Eisman expects the US economy and financial markets to remain strong as long as the White House signs peaceful tariff agreements with other nations.
Without escalation on the tariffs front, America’s fundamentals – full employment, service-sector flexibility, and energy independence – support long-term growth and equity gains.
However, if new levies result in a trade war, a global recession sure could follow, he argued.
Is there any further upside left in the S&P 500 index?
Eisman’s remarks arrive shortly after Citi raised its year-end target on the S&P 500 to 6,300, which indicates potential for another 5% upside from current levels.
In his recent note to clients, the firm’s top strategist, Scott Chronert, cautioned against chasing rallies since policy-related volatility could continue in the back half of 2025.
Instead, investors should have the dry powder all ready to load up on US stocks on pullbacks, the Citi strategist recommended in his latest report, adding “investors will tend to look through shorter-term policy noise in aggregate.”
Note that Citi is far from alone in keeping bullish on the S&P 500 index. Others that have upwardly revised their year-end targets as well include RBC, Deutsche Bank, Barclays, and JPMorgan.
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