S&P 500 & Nasdaq Best Quarter Since 2020: Nasdaq Soars 21% Amid Iran War

For investors, the second quarter of 2026 was a masterclass in market resilience. Even as the Iran war dragged on, US equities not only held their ground but delivered blockbuster returns—the Nasdaq surged 21% while the Dow hit back-to-back records. This performance rewrites the playbook on how geopolitical risk interacts with equity markets, demonstrating that when earnings growth and economic momentum are robust, even a regional conflict can fade into the background. However, the backdrop of a potential Fed rate hike and fragile peace talks means that portfolio positioning for the third quarter requires a careful balance between chasing momentum and hedging against sudden reversals.

The S&P 500 and Nasdaq Composite closed out the second quarter of 2026 with their largest quarterly gains since 2020, a striking testament to the resilience of US equities in the face of a major Middle East conflict. The Dow Jones Industrial Average also hit a second consecutive record high on June 30, underscoring the rotation and broad market strength. This performance came despite the ongoing Iran war, which began roughly four months earlier and initially sent oil prices soaring and inflation fears spiraling. The chief catalyst for the rally was the robust US economy and better-than-expected corporate earnings, themes emphasized by Oliver Pursche of Wealthspire Advisors, who noted that “in spite of all the geopolitical stuff, the US economy is performing well and corporate earnings are strong.” Investors largely shrugged off the conflict, instead fixating on fundamentals and signs that a ceasefire might be within reach.

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However, weakness in heavyweight tech names had emerged in recent weeks, causing a divergence: for the month of June, the Nasdaq fell 2.8% and the S&P 500 slipped 1.1%, while the Dow added 2.5%.

The geopolitical backdrop was far from stable. On June 17, Iran and the US signed a memorandum of understanding aimed at ending the conflict, which sparked a spate of risk-on buying. However, over the final weekend of the quarter, new exchanges of fire tested that fragile agreement, and by June 30, Qatari mediators confirmed that high-level US-Iran talks in Doha had stalled. Despite this setback, the market’s upward momentum on the last day of the quarter demonstrated that investors were increasingly willing to look through the noise, focusing on the potential for lasting de-escalation.

Technology was the undisputed leader among S&P 500 sectors, with semiconductor stocks surging 3.9% on the final day alone. The Nasdaq’s 21% quarterly gain was fueled largely by the artificial intelligence boom, which continued to drive demand for chips and software. However, weakness in heavyweight tech names had emerged in recent weeks, causing a divergence: for the month of June, the Nasdaq fell 2.8% and the S&P 500 slipped 1.1%, while the Dow added 2.5%. This rotation highlighted a shift toward cyclical, value-oriented sectors such as energy and financials, a strategy endorsed by Bank of America strategists heading into the second half of the year.