Strategists at Morgan Stanley have indicated that a stable resolution to the Middle East situation could prompt the bond market to unwind its bets on Federal Reserve interest rate hikes, thereby increasing the likelihood that the current bull market will continue.

A team led by Mike Wilson noted in a report that market volatility is expected to increase in the coming weeks, but reiterated its confidence in the continued rise of U.S. stocks.

The report stated that recent declines have been led primarily by memory chip stocks.

The team wrote that such rotations are a normal feature of earnings-driven bull markets, especially in cases "where the rally has been as powerful as this one."