While the human and economic costs continue to mount from now-45-day-old Iran war, the U.S. stock market has moved on.

Rising in eight of the last nine trading sessions, the S&P 500 is sitting just 1.32% away from its Jan. 27 record close, hovering early this week near levels seen before the conflict began. While retail and institutional investors alike have stepped back from U.S. stocks as the conflict simmered, our call of the day flags big Wall Street U-turns from Citigroup and BlackRock.

At Citigroup, strategists are now recommending overweighting U.S. stocks, shifting from a prior neutral stance. They describe the shift as a tactical move — shelter in the highest-quality and most-defensive pockets of the equity landscape, found in the U.S. That’s as they see Middle East tensions getting worse before they improve.

A team of strategists led by Beata Manthey said total damage from the U.S. and Israeli war against Iran is “likely contained” from here. Citi argued that U.S. stocks can weather the storm: “At this point, we assume a headwind to consumption, inflation and Fed rate considerations, probably manageable so long as the current cease-fire trends to a wind down of hostilities over the next several weeks.”

A second reason surrounds the cracks Citi can now see in what was a hopeful narrative of cyclicals and smaller companies starting to close the earnings gap with megacap and other big-cap tech leaders.

“Instead, the EPS contribution picture is narrowing again, with most of the incremental global earnings growth now expected to come from AI‑ and tech‑linked segments,” said Citi. That’s as continued outperformance of rest-of-the-world stocks versus the U.S.’s are also hitting speed bumps, due to spiking commodity prices and global-economic-growth fallout.

“With cyclicals bearing the brunt of margin pressure and earnings uncertainty, the relative story shifts back toward the U.S., where earnings growth is increasingly dominated by resilient, high‑margin, AI‑ and tech‑enabled sectors,” the Citi team said.

Until macro conditions stabilize and cyclical visibility improves, the rest of the world will struggle to catch up, reinforcing what U.S. stocks have to offer.

A final reason circles back to tech. While Magnificent Seven stocks have been a “sizable drag” on U.S. equity performance this year, Citi is arguing that fundamentals remain strong. “The megacap tech cohort has seen consistent upward revisions to EPS and now trades at a meaningfully cheaper multiple vs. its history than the rest the U.S. index.”

Citi targets an S&P 500 finish of 7,700 at year’s end. Materials, healthcare and information technology are its sector overweights.

Elsewhere, strategists at the BlackRock Investment Institute are also now recommending overweight positioning in U.S. stocks, after turning neutral a few weeks ago at an earlier stage of the Iran conflict. A team led by Jean Boivin offered two reasons for that, and noted it’s less of a shelter argument.

“First: evidence of actions that could reopen shipping traffic in the Strait of Hormuz. Second: signs that any lingering macro impact is contained. We have seen developments on both fronts,” said Boivin, who is also recommending an overweighting of emerging markets.

Expectations for corporate earnings in the U.S. and emerging markets are also rising for 2026, driven by the AI theme that also helps Taiwan and South Korea, said BlackRock. In the U.S., a forecast 80% boost for chip-stock earnings this year is helping drive tech and overall earnings uplift, they say.

“Tech’s valuation premium has been eroded, with the 12-month forward valuation of the U.S. IT over other sectors at its lowest level since mid-2020. At the same time, the tech sector is now seen posting earnings growth of 43% in 2026, up from 26% last year,” said Boivin and his team. The team also likes thematic opportunities such as defense.

BlackRock addressed the elephant in the room — was it not overcautious in its neutral stance? The reply: that the move “cost a few percentage points at the U.S. index level — a fair price to avoid a far costlier downside scenario materializing from worsening supply disruptions.”