I stood on the floor of the New York Stock Exchange and shared a view that surprised many people watching the tape: the Iran conflict is not crushing U.S. stocks. That is not a comment on the seriousness of war. It is an observation about what drives markets in this moment. Three forces are doing the heavy lifting: lower household exposure to energy costs, a surge in investment in artificial intelligence that extends far beyond Silicon Valley, and firm corporate earnings.
As CEO of LifeGoal Wealth Advisors, and as a CIMA and CFP, I track how shocks ripple into spending, profits, and pricing. This year, stocks are looking past the headlines because the economic hit has been smaller than feared, while profit drivers remain strong. Here is how those forces stack up, and how I think about risk and positioning in this kind of tape.
The Three Reasons Stocks Are Holding Up
“Americans really don’t spend much on gas and energy anymore. AI is overpowering everything. Corporate earnings haven’t budged—in fact, they’ve popped.”
- Energy is a smaller slice of household budgets than in the 1970s—under 5% today versus about 10% then.
- Global AI spending is set to reach roughly $2.5 trillion in 2026, fueling jobs and capital projects across many industries.
- Corporate earnings expectations have risen, with about 19% growth projected this year.
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What Changed Since the 1970s Oil Shocks
In the 1970s, energy price spikes hit families hard. Gas and home energy bills chewed through about a tenth of the typical household budget. When oil jumped, consumers pulled back on other spending. That dragged the economy, and stocks fell.
Today looks different. Energy now accounts for less than 5% of the average household’s budget. Vehicles use less fuel per mile. Homes are better insulated. The economy is more service-based and less oil-intensive. As a result, even a sharp move in crude does not bite the way it used to. Families still notice higher pump prices, but the drop in discretionary spending is smaller and shorter-lived.
On the corporate side, many companies hedge energy costs or pass them through to customers with delays. Supply chains have also diversified since earlier shocks. Those shifts reduce the speed and scale of earnings pressure from oil spikes.
AI Investment Is Offsetting Geopolitical Shock
Artificial intelligence is not a narrow tech story. It is a spending story spanning data centers, chips, power systems, construction, and the skilled trades. The global bill for AI is projected to reach about $2.5 trillion in 2026. That money funds cloud capacity, training models, software tools, and the physical buildout to run them.
What matters for markets is who gets paid along the way. It is not just software developers. Electricians wire data centers. Steel and concrete go into new buildings. Utilities plan for more power. Logistics firms move the gear. Chipmakers expand fabs. That cascade of activity supports jobs and orders in many regions.
Capital spending tends to counterbalance shocks. When companies commit to multi-year projects, they keep spending through headlines. That steadies demand even if consumers pause for a quarter. Right now, AI demand is acting like a bridge. It is creating a base level of growth that offsets some of the drag from geopolitical risk.
There is also a productivity angle. If AI tools help workers do more in less time, companies may see revenue per employee rise. Over time, that can support margins even in a moderate growth backdrop. Markets discount those future gains, which is why certain tech and industrial names hold up during tense news cycles.
Earnings Drive Markets, Not Headlines
Stocks trade on future cash flows. If profits hold or grow, prices tend to find support. Right now, earnings expectations have not cracked. In fact, consensus calls for about 19% earnings growth this year. That figure reflects strength in technology, communications, and select industrials, along with steadier performance in services.
Headline risk can move prices day to day. But lasting drawdowns usually come when earnings fall, or credit tightens sharply. We are not seeing that pattern. Credit markets remain open. Banks and bond investors are still funding companies. Many firms carry more cash than they did a decade ago and have locked in low-rate debt. That cushion matters.
Another factor is guidance. Corporate leaders tend to be careful during tense times. If they expected a deep hit from war-driven shocks, they would usually trim guidance quickly. So far, cuts have been limited and targeted. That builds confidence that demand is holding up across key sectors.
How This Shows Up on the NYSE Floor
Standing on the floor, I heard the same questions over and over: Will oil spike push the economy into a stall? Will the AI surge run out of steam? And what happens if earnings prove too optimistic? Those are fair questions. The tape often answers them before the data hits the headlines.
Recently, oil-sensitive airlines dipped, but not in a straight line. Energy producers bounced on supply concerns, then cooled as traders priced in possible diplomatic moves. Semiconductor names rallied on capacity orders. Construction and engineering firms tied to data center projects saw steady bids. That rotation maps to the three forces above: limited consumer energy drag, strong AI buildout, and firm earnings.
What I’m Watching Next
I track a few indicators that would signal a change in the story. First, the share of household spending on energy. A sustained jump would warn that consumer strength could fade. Second, capital spending plans from major AI players. If those get delayed or scaled down, the offset to geopolitical risk shrinks. Third, earnings revisions across sectors. Broad cuts would tell me the cushion is thinning.
I also watch credit spreads. If borrowing costs for companies gap wider, even healthy firms can slow investment. So far, spreads have moved, but not in a way that points to stress. That keeps the base case supportive for equities, even with unsettling news.
Practical Takeaways for Investors
The goal is not to predict headlines. It is to understand what moves cash flows and valuations. With that in mind, a few principles help in periods like this.
- Focus on earnings trends rather than headlines. Price follows profits over time.
- Look across the AI ecosystem. It reaches far beyond software into power, chips, equipment, and construction.
- Check your exposure to energy swings. Diversify so one input cost does not dominate results.
- Keep an eye on balance sheets. Companies with strong cash and fixed-rate debt handle shocks better.
Risk management still matters. A balanced mix of sectors can reduce swings. Quality companies with pricing power and recurring revenue tend to hold up when costs jump. Firms tied to durable capital projects can benefit from multi-year AI plans.
Context: War, Markets, and Human Cost
Wars are tragic. The human cost is real and heavy. Markets, though, are blunt instruments. They price earnings, interest rates, and risk perceptions. That is why they sometimes seem detached from events. The current setup reflects that divide. The economy’s lower energy intensity, the pull of AI investment, and steady profits are combining to mute the hit to stocks.
None of this dismisses uncertainty. Escalation could change the equation. But the present data explains why equities have not cracked under the weight of the headlines. Investors often ask how that can be so. The answer lies in budgets, capex, and earnings, not only in the news feed.
Sector Snapshots
Energy producers gain from higher prices but face policy shifts and supply responses that can cap rallies. Refiners watch crack spreads more than crude alone. Transportation names feel fuel costs first, but also benefit if travel demand stays firm. Industrials tied to data center builds, power equipment, and grid upgrades see steady orders. Utilities juggle demand growth and rate cases as AI power needs rise. Tech leaders with AI scale enjoy demand visibility that backstops spending plans.
Consumer companies sit in the middle. If fuel prices rise modestly, many can absorb the cost or pass it on. If prices spike and stay high, lower-income shoppers feel it first, and trade-down effects show up. So far, the read-through suggests manageable pressure.
Why This Time Is Different From Classic Oil Shocks
Three design changes across the economy help explain the gap with the 1970s. First, efficiency. Cars travel farther on a gallon of gas, and appliances use less power. Second, diversification. The U.S. produces more energy at home and relies on a wider set of suppliers. Third, policy tools. Strategic reserves and clearer communication can blunt extremes. None of these removes risk, but they smooth it compared with past cycles.
The market also discounts new technology faster than it used to. Investors believe that AI can raise output across many tasks. That belief drives capital to projects that take years to finish. As those projects roll on, they keep factories running and crews on site, which steadies demand through noisy periods.
Bottom Line
Three facts explain why stocks have not broken under the strain of the Iran conflict: households spend a smaller slice on energy, AI investment is powering wide parts of the economy, and earnings are holding up with roughly 19% growth expected this year. Markets do not ignore war; they weigh it against cash flows. Right now, the scales tip toward steady profits and persistent capex.
Stay focused on budgets, investment pipelines, and earnings revisions. Watch credit conditions for early signs of stress. Position for quality and durable cash flows. That is how to handle unnerving headlines without losing sight of what drives returns.
Frequently Asked Questions
Q: Could a sharp oil spike still derail the market?
A sudden and extreme surge in oil can rattle stocks, especially if it lasts. The key watch items are gas as a share of household spending and earnings revisions. If energy takes a larger share of budgets and profit outlooks decline across many sectors, the risk of a deeper pullback rises.
Q: How does AI spending support jobs outside of technology?
Large AI projects need physical infrastructure. That includes data centers, upgraded power systems, cooling, and security. Electricians, construction crews, equipment makers, and utilities all participate. The result is steady orders and employment that do not depend only on software demand.
Q: What signals would make you reassess equity exposure?
I would reassess if energy’s share of consumer budgets climbs materially, if major AI players cut capital plans, if credit spreads widen sharply, or if earnings estimates fall across many sectors. Those signals would suggest the cushion is fading and warrant a more defensive stance.
