Market indexes soared on the Iran truce, but risks remain

The top market indexes all rose today, thanks to a two-week truce in the war with Iran. The Dow Jones Industrial Average (DJINDICES: ^DJI), the Nasdaq Composite (NASDAQINDEX: ^IXIC), and the S&P 500 (SNPINDEX: ^GSPC) were up by 2.3%-2.9% as of this writing at 1:30 p.m. ET, while the CBOE Volatility Index (VIX) plunged 17% lower.

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The Dow marched to its own beat again

The S&P 500 and Nasdaq lists took similar paths to comparable gains. The top eight holdings are identical across these market cap-weighted indexes, so most of today's gains sprung from Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) 4% gain and Meta Platforms's (NASDAQ: META) 8% jump.

The Dow is a different beast, weighted by share prices instead of market caps. As a result, the chief drivers of its rising score were Goldman Sachs (NYSE: GS) and Caterpillar (NYSE: CAT), currently priced at $899 and $768 per share, respectively.

Banks like Goldman benefit from reduced geopolitical uncertainty. Signs of lower international tension are also good news for industrial giants like Caterpillar.

As for the tech stocks, Wall Street seems anxious to get back to their favorite growth drivers after a weak first quarter of 2026. Moreover, Meta just released a new large language model (LLM) for Facebook, Instagram, and WhatsApp. The Spark platform should help Meta scale its AI tools faster than it did with the old Llama system.

Even after today's significant jumps, Meta's stock is down 6% year-to-date and Alphabet has only gained 2% over the same period.

The ceasefire is real, but so are the risks

I'm happy to see progress in the Iranian conflict but there's more work to be done. The Strait of Hormuz shipping volume is still restricted and Vice President JD Vance calls this ceasefire "fragile" in official comments. Both sides are claiming the armistice as a victory, and nobody expects a full termination of the conflict at this point.

That 17% VIX drop suggests investors are pricing in smooth sailing ahead. But with Vance taking a cautious tone and Strait shipping still limited to just a few ships a day, the market's optimism may be getting ahead of itself.

As always, days like this are just blips in a decades-long investing journey. The VIX and the Dow may swing wildly, but your time horizon shouldn't.

Volatility cuts both ways, after all. One day's headlines don't matter much over a 10- or 20-year horizon. Stay patient, stay diversified, and maybe keep some cash ready for the next unreasonable dip.

Anders Bylund has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Caterpillar, Goldman Sachs Group, and Meta Platforms. The Motley Fool has a disclosure policy.