Despite recent volatility, Wall Street strategists point to signs that markets may be trying to look past the Iran conflict.

Even with oil above $100 since the war began, the S&P 500 (^GSPC) is down about 4% and nearly 6% below its all-time high.

"The message of the market is there's still something in there," Carson Group chief market strategist Ryan Detrick told Yahoo Finance this past week.

"We've withstood so much negativity, and everyone is so worried on the other side — that maybe that beachball under the water gets some good news and that ball can go up," he added.

A hint of that came last Tuesday when the S&P 500 leaped 2.9% for its largest gain since May after President Trump signaled he was considering winding down military presence in Iran over the next two to three weeks.

"If Trump is declaring mission accomplished, then so are we regarding our stock market correction call," Ed Yardeni and Elias Griepentrog of Yardeni Research wrote following the rebound.

They said their firm will likely lower its recession probability from 35% to 20% once there is greater clarity on whether the Middle East conflict has truly ended.

"Nevertheless, we are maintaining our 7,700 S&P 500 year-end target and our commitment to our 'Roaring 2020s' base case," they wrote.

Read more: How to protect your money as Mideast turmoil fuels market volatility

Strategists at UBS noted the sharp rebound on positive headlines showed how a resolution to the conflict —or even hopes of one — can quickly drive markets higher, "reinforcing the importance for long-term investors to stay invested and positioned for upside."

"We continue to believe global stock markets will end the year higher than they are today," wrote Ulrike Hoffmann-Burchardi, chief investment officer Americas at UBS Global Wealth Management.

While some economists warn that prolonged energy costs heighten risks of stagflation, a lack of data has prevented Wall Street from slashing profit forecasts.

Read More: What is stagflation, and how does it impact you?

"Maybe [its] because analysts have been just sort of flying blind a little too much lately, but we haven't seen earnings estimates moved down in a material way," said Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research.

"That is sort of a reflection of, so far, the data not showing that the economy is struggling, at least right now," he added.

In fact, heading into the earnings season, companies and analysts have been more optimistic than usual in their outlook for the first quarter, according to FactSet data.

The S&P 500 is expected to report year-over year earnings growth of 13.2%, compared to the estimated 12.8% calculated at the end of last year. This would mark the sixth consecutive quarter of double-digit annualized earnings growth for the index.

"The volatility is uncomfortable, the headlines are uncomfortable. But if we look back 6-12 months from now, I wouldn’t be shocked at all if this bull market continues," Carson Group's Detrick said.

For that to happen, tech would need to reassert itself. Last quarter, the sector faced a confluence of headwinds, including rising yields that pressured lofty valuations, profit-taking, and the loss of its equity safe-haven appeal.

Despite this past week's market rebound, Tesla (TSLA), Alphabet (GOOG, GOOGL), Amazon (AMZN), Meta (META), Microsoft (MSFT), Apple (AAPL), and Nvidia (NVDA), are all down year to date.

"Mag 7 has gotten its head clobbered, especially in the last quarter. And that’s unusual for them," EMJ Capital founder Eric Jackson said on Opening Bid last week.

"I do think these guys are due to catch a bid in Q2 and Q3," he said.

Given the continuing energy-driven shock from the Middle East conflict and threat of AI disruption, Goldman Sachs analysts noted their strategy leans toward defensive, heavy asset, and commodity-linked sectors for the time being.

"Our sector views are anchored in a preference for (1) Financials, (2) heavy-asset sectors with lower technology obsolescence risk; (3) commodity- and defense-linked sectors," they said in a note on Thursday.

"Key overweights include Banks, Insurance, Energy, and Aerospace & Defense," they said.

Meanwhile, key underweights include Automotive, REITs, and Food & Beverage, given their sensitivity to high interest rates and rising oil costs, the analysts added.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.

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