There is an old saying in markets: Buy when the bullets (or bombs or missiles) fly.

That is exactly what investors in the U.S. did on Monday. Equity index futures initially dropped Sunday evening, as trading reopened following the bombardment of Iran by the U.S. and Israel over the weekend.

But by the time lunchtime had arrived on the East Coast on Monday, U.S. stocks were in much better shape. The S&P 500 and Nasdaq Composite managed to finish in the green. Even the Dow Jones Industrial Average — which had dropped nearly 600 points shortly after the opening bell — ended well above its session lows, though it did close with a 73-point decline, FactSet data showed.

The same cannot be said for international stocks, which didn’t see much respite from the selling. The iShares MSCI ACWI ex-U.S. ETF, which tracks an index of international equities, finished 1.7% lower on Monday, its worst day since late January, according to Dow Jones Market Data. Meanwhile, haven assets like gold and the U.S. dollar rallied, with the greenback tallying its best day since July.

It might be tempting to dismiss Monday’s move as a sign that investors — at least buyers of U.S. stocks — seem too complacent about the potential for the war to negatively impact the global economy, or even on the U.S. in particular.

And to be sure, investors still have reasons to be cautious. Iranian media reported on Monday that Iran’s Revolutionary Guard Corps had closed the Strait of Hormuz, promising to fire on any ship that attempts to traverse it, according to a Reuters report. The strait has been effectively closed since Saturday, as shipowners and insurers have looked to steer clear of the conflict. Several tankers have already been struck by attacks.

Moreover, energy production in the region has taken a hit. QatarEnergy said it was halting production of liquified natural gas in response to an attack on its facilities in Ras Laffen and Mesaieed. And Saudi Arabia’s Aramco halted operations at its largest oil refinery at Ras Tanura.

Over the past few years, investors have been conditioned to reflexively buy the dip in stocks during periods of geopolitical stress. Despite some confusion about the path forward, old habits apparently die hard.

“The conflict between the U.S. and Iran is certainly a difficult one to understand and try to determine what comes next, but a lot of investors have lived through this throughout their lifetimes and realized there’s no benefit to overreacting, so that’s caused them to tune out a bit on Monday,” said Chris Maxey, chief market strategist at Wealthspire Advisors, during an interview with MarketWatch.

While this kind of dip buying definitely played a role in Monday’s market recovery, several strategists and portfolio managers who spoke with MarketWatch on Monday said there was more to the story.

“I think that the market is actually correctly looking through the commencement of the war,” said Chris Grisanti, chief market strategist and a portfolio manager at MAI Capital Management.

‘We’re a net exporter’

Surging energy prices destabilized stocks trading in Asia and Europe on Monday. But there is one important reason why the U.S. market wasn’t as badly affected: The U.S. has been a net energy exporter since 2019, during President Trump’s first term in office.

Indeed, surging energy and defense stocks helped bolster major U.S. equity benchmarks on Monday. The S&P 500’s energy sector finished at a record high after tallying its biggest one-day jump in a couple of weeks, Dow Jones Market Data showed.

“We’re a net exporter — we’re almost like an OPEC country that benefits from higher energy prices,” said Eric Wallerstein, chief market strategist at Clocktower Group, during a conversation with MarketWatch. “That also limits the feed-through of higher energy prices to core inflation.”

Iran considerably weakened

The Iran of 2026 isn’t the Iran of 2015 or even 2023 — before Hamas attacked Israel, setting off a wave of conflict in the region.

After repeated skirmishes with the U.S. and Israel, Iran’s defensive capabilities have been drained. Economic sanctions have helped to cripple its economy. Widespread protests, which have been brutally suppressed by the Iranian government, nevertheless helped to destabilize the country.

“This is probably the last breath for Iran’s posture in the Middle East,” Wallerstein said.

PMI came in strong

Amid the chaos of the conflict, U.S. investors received some good news on the state of the economy on Monday.

The Institute for Supply Management’s manufacturing purchasing managers index came in at 52.4 in February. That was down slightly from 52.6 in January, but it still marked a second straight month of expansion. Any reading north of 50 signals improving activity.

This likely helped boost small-cap stocks, although the Russell 2000, a widely followed small-cap index, also benefited from a rebound in shares of regional banks, Wallerstein said.

“Fun fact: This is the first time since September 2022 where we saw two back-to-back ISM [manufacturing] readings above 50,” said Michael Kantrowitz, chief investment strategist at Piper Sandler, in commentary shared with MarketWatch. He said the data supported his team’s view that the U.S. economy is heading for a soft-landing cyclical rebound that will last into 2027.

Tech valuations have looked attractive

A major rotation has been underway in the U.S. equity market in 2026. Megacap technology stocks like Nvidia, Amazon and Microsoft lost some of their shine. Shares of software companies cratered as investor fears about artificial-intelligence disruption mounted.

Meanwhile, small caps, cyclicals and value stocks trading in the U.S. — which had all lagged Big Tech for much of the past three years — have powered higher. International stocks have also continued to outperform U.S. benchmarks like the S&P 500.

As fighting broke out, some investors decided to take advantage of the dip to buy shares in beaten-down tech names. Nvidia and Microsoft rallied on Monday. So did shares of Palantir, a popular defense-tech name that had recently traded well below its all-time highs. The S&P 500’s software sector, which had been steamrolled by AI fears, also finished higher.

“Investors are getting down to brass tacks and saying, ‘What do we want to own over the next few months?’” MAI’s Grisanti said.

Risks remain

Investors have determined that this conflict is likely to come to a conclusion before it has a material impact on corporate earnings. Earnings, after all, are what markets really care about.

Still, nobody can say for sure how the situation in Iran will play out. This means stocks could experience more volatility down the road if things take an unexpected turn.

President Donald Trump said during a press briefing on Monday that he is leaving the door open to an extended military campaign against Iran, saying the U.S. has the capability to go beyond its initial estimate of the operation. He said the conflict could last longer than a few weeks.

If oil and natural-gas supplies remain disrupted for multiple weeks, that could hurt European and Asian economies that depend on imported energy, Wallerstein said. That, in turn, could dampen global growth.

“Anything that lasts longer than two or three weeks would be pretty bad,” Wallerstein said, “although that seems like a really low likelihood to me.”

JPMorgan Chase CEO Jamie Dimon sounded a bit more downbeat. During an interview with Bloomberg on Monday from a JPMorgan conference in Miami, he warned that there is “a lot of complacency” in the market. Inflation, in particular, remains a risk, he noted.

George Catrambone, head of fixed income for the Americas at DWS, said there are other risks that could spoil the stock market’s party — more stress in private-credit markets being one such example.

But the situation in Iran will likely remain front and center for investors, at least for the time being.

“There may be overtures for peace,” Grisanti said. “You want to have your positions established before that happens.”