U.S. equity markets finished the week higher, with several indices pushing to fresh record highs, as broadly positive economic data, continued strength in artificial intelligence-linked stocks and supportive earnings helped offset persistent uncertainty surrounding the U.S.-Iran conflict. The technology-heavy Nasdaq Composite led gains, rising 1.5%, while the S&P 500 advanced 0.55%. The Dow Jones Industrial Average slipped 0.44%. Bonds declined as markets interpreted the midweek extension of the ceasefire as reducing the likelihood of a near-term resolution. Across the Atlantic, sentiment deteriorated more visibly. The pan-European STOXX Europe 600 fell 2.54%, with defensives such as utilities and telecoms outperforming. Losses were broad-based, with Germany’s DAX down 2.32%, Italy’s FTSE MIB falling 2.48%, France’s CAC 40 declining 3.17% and the UK’s FTSE 100 losing 2.70%. In Asia, performance was mixed, with Japan’s Nikkei 225 gaining 2.12% while Hong Kong’s Hang Seng edged 0.70% lower. Looking ahead, with the Strait of Hormuz still largely closed and the geopolitical stalemate showing little sign of resolution, attention turns to a pivotal week for both earnings and policy. Alphabet, Microsoft, Amazon and Meta Platforms report on Wednesday, followed by Apple on Thursday. On the policy front, the April Federal Reserve meeting — widely expected to be Jerome Powell’s last as Chair — is unlikely to deliver a rate move, though the risk lies in a more hawkish tone as markets assess the inflationary impact of the Iran war. Focus will then shift to the PCE deflator and first-quarter GDP data. Will the persistence of geopolitical risk begin to expose deeper cracks in global markets?

The S&P 500 eked out a fourth consecutive weekly gain — its longest winning streak since 2024 — as investors navigated the fluid backdrop of the Iran conflict. Much of the advance was concentrated on Friday, as signs emerged that U.S.-Iran negotiations would continue, following a series of choppier sessions earlier in the week. Technology stocks were the clear drivers, led by semiconductors. Intel surged 21% after blowout earnings, while Advanced Micro Devices and ON Semiconductor rose 25% and 19%, respectively, extending the Philadelphia Semiconductor Index to a record 18-day winning streak. Across asset classes, the dollar ended the week marginally stronger, tracking developments around Iran, while rates drifted higher in a quieter week for fixed income as markets continued to price lingering geopolitical uncertainty. In Europe, momentum faded after four consecutive weeks of gains as Brent climbed back above $105 per barrel from around $86 just a week earlier, despite the absence of a clear catalyst beyond the indefinite extension of the ceasefire. Earnings have done little to offset the weakness: roughly a quarter of STOXX 600 companies have reported, with both revenue and profit beats lagging U.S. and global peers. Absent a geopolitical breakthrough, focus now shifts squarely to earnings, where the recent outperformance in technology may offer an early preview for mega-cap results, and the growing expectations that AI investment is beginning to translate into tangible returns.

Taking a step back, one by one, high-conviction trades on Wall Street and beyond are falling out of favor. The largest U.S. oil ETF, USO, is on pace for its steepest monthly outflow since 2009, while the biggest semiconductor fund, SOXX, is heading for its second-largest weekly withdrawal on record — just a week after attracting peak inflows. Both remain among the market’s most crowded trades. Both continue to perform. Yet investors are beginning to cash out. Europe fits the same pattern. Strong inflows drove Europe’s outperformance versus the U.S. — but that outperformance has now evaporated, as weak earnings and softer macro data reinforce concerns that the Iran war is evolving into a more persistent stagflationary drag.

More broadly, the common thread is positioning. Oil and semiconductors weathered the AI- driven disruption earlier in the year and continued to attract capital through March’s macro reshuffle, when the U.S.-Iran conflict strengthened the dollar and pressured international equities. That dynamic is now starting to reverse. With four trading sessions remaining in April, Goldman Sachs estimates U.S. pension funds will sell more than $20 billion of equities and rotate a similar amount into bonds as part of month-end rebalancing.

In reality, markets are prone to sharp reversals, and most mean little. This time, however, two forces — AI and war — are leaving a deeper imprint, and neither has fully played out. Investors continue to reassess which business models can sustain durable growth and which risk being eroded by AI, while the conflict is disrupting cross-asset relationships and driving correlations out of line. Against that backdrop, the case for oil and chipmakers has been clear. Semiconductors have ridden the AI capex wave, while oil has been anchored by supply fears following the closure of the Strait of Hormuz. Both have attracted sustained inflows for months. But when trades become crowded, flows tend to turn before fundamentals — and often before prices fully adjust. Gold’s recent selloff was one example; this week’s pullback in oil and semiconductors may be another, even as both remain firmly positive for the year. For now, that move looks more like disciplined profit-taking than the start of a broader unwind. And in the near term, the broader market may remain more resilient than positioning alone might suggest. While the S&P 500 has moved into overbought territory, JPMorgan analysts note that momentum remains intact and, as long as the index holds above the 6,900–7,000 breakout zone, the underlying uptrend continues to be supported. By contrast, Europe is simply not generating the upside needed to sustain its earlier re-rating.

In summary, if there is one lesson from markets in 2026, it is that one-sided positioning can quickly become a source of instability. With two disruptions running in parallel — AI reshaping earnings and the Iran war reshaping capital flows — leadership has become increasingly fragile, prone to abrupt rotations. Trades that worked earlier in the year — long bonds, dollar weakness, international equities — were all defensible, until they weren’t. Looking ahead, price action continues to reflect a market willing to look through uncertainty. The S&P 500 has pushed to fresh highs after four consecutive weeks of gains, Bitcoin is approaching $80,000, and retail participation is returning. In such an environment, sentiment and positioning are proving as important as fundamentals in driving direction. The clearest disconnect now lies between equities and rates. Stocks are trading at record highs, effectively looking through the Iran war, while the 10-year Treasury yield remains over 30 basis points above its pre-conflict level — a gap that is unlikely to persist indefinitely. With valuations stretched and month-end flows looming, investors should expect this gap to close.