The Middle-East conflict has flipped the playbook on the equity market. Where "sell America, buy Asia" dominated before the US and Israeli strikes on Iran, everything has reversed 180 degrees. China and other regional economies are seen as the most exposed to Tehran's effectively closing the Strait of Hormuz — the bulk of that crude flows to Asia. The capital exodus helped the S&P 500 recover.

Performance of US and Asian stock indices

If through February, investors were cheering the runs in Korea's KOSPI and Taiwan's TWSE, with the onset of spring, those indices have become laggards. It is not just the Hormuz shutdown. A protracted Middle-East war risks slowing global growth, hitting export-dependent economies such as China and others in the region.

Money fleeing Asia is not the sole reason the S&P 500 has held up. The year-to-date consolidation in the broad index reflects the tug-of-war between institutional sellers of growth and retail buyers of dips — and the latter have become a potent force. JPMorgan data show that when stocks plunged at the start of the first week of spring, retail investors ploughed about $2.2bn into equities and ETFs. They keep buying the dips the old-fashioned way.

Performance of US stock indices

The crowd's burst of activity was triggered by upbeat US macro data. The ISM services PMI jumped to its highest level since 2022, and private sector employment rose by 63,000 in February. Stabilization in the labor market is excellent news for the economy and a reason to buy small-caps that react strongly to it.

Add in a tailwind from tax relief and the White House restoring tariffs — effectively a fiscal boost for Americans paying them — and medium-term GDP prospects start to look appealing to investors.

S&P 500 bulls hope that if the broad index suffers a serious pullback, Donald Trump will toss it a lifeline. The president reacted briskly to Iran's threat to torch any ship transiting the Strait of Hormuz, offering to provide tanker protection for a modest fee. Still, BCA Research warns only a 10–15% market drawdown would likely force the White House to change its tone. Until TACO — or Trump always chickens out — that moment remains far off.

Technically, the S&P 500 formed a pin bar on the daily chart that allowed traders to go long at 6,840. A breakout of fair value at 6,890 would justify adding to long positions. If all goes well, the broad index could run to the upper boundary of the 6,800–7,000 consolidation range, from where an uptrend might be restored.