- Stock volatility has surged as investors assess the ongoing Iran war and potential rate hikes.
- Equities have been resilient in 2026, but investing pros flag signs of volatility ahead.
- Technical signals in the VIX, tech-dominated gains, and more point to stock volatility ahead.
Wall Street is seeing volatility resurface, with stocks rocked by a re-escalation in the Iran war and squashed hopes of any interest rate cuts from the Federal Reserve in 2026
The equity market has been surprisingly resilient in the first half of the year, but it’s been far from a straight line up
The S&P 500 has recovered from its Iran-war lows at the end of March and then some, climbing to fresh record highs nearly 100 days into the war
The mega-IPOs from SpaceX, Anthropic, and OpenAI are expected to add to mounting volatility risks as liquidity shifts and investors flock to the colossal offerings, but beyond the historic IPOs, here are four reasons stock market volatility could continue
The Cboe Volatility Index, otherwise known as the VIX, is often considered the stock market’s fear gauge
In recent trading sessions the VIX has surged, seeing its largest year-to-date single day jump of nearly 40%, topping the volatility spikes during the onset of the war in Iran
Piper Sandler’s chief market technician Craig Johnson flagged that the VIX is above key levels, signaling investors are risk-off
“The VIX rose by 11.8% after recapturing the 50-/200-day MAs, remaining above a critical resistance level of 20. Historically, a sustained level above 20 indicates an increase in equity volatility,” he wrote
Tech has been one of the top-performing sectors in 2026, second only to energy, which has been driven higher by the historic Iran-war oil disruption
The outsize influence of tech makes the market all the more sensitive to higher rates
The market has repriced its expectations for the Federal Reserve to lower rates, pricing in a hold or even a rate hike through the rest of this year, compared to two to three cuts expected at the start of the year
The 10-year Treasury yield is around 4.52%, above the , after surging on the onset of the war in Iran. The 2-year yield was at 4.14%, above the current Fed rate, supporting a potential hike
“Technology stocks are sensitive to interest rates: Higher rates can have a greater impact on growth-oriented sectors such as technology, contributing to larger market swings,” Cross Border Wealth explained
Within tech, AI spending has dominated the market narrative with Big Tech investing billions into AI
The massive capex has fueled the AI trade on Wall Street and could contribute to heightened volatility
Goldman Sachs analysts noted that AI spending is likely to exceed tech companies’ guides, which implies additional upside for the earnings and stock price of AI infrastructure beneficiaries
Earnings have dominated tech-driven market moves higher, with some flagging it’s creating an AI earnings bubble, but recently valuations have expanded
“Recent valuation expansion and positioning dynamics suggest additional volatility ahead,” Goldman said, adding that the P/E of the median AI infrastructure stock has hit its highest multiple since the launch of ChatGPT
They outlined, “Rapid price appreciation, elevated valuations, and crowded positioning in some slices of the infrastructure complex increase the risk of volatility.”
Historically midterm election years tend to be volatile for equities
Since 1970, midterm years have a median return standard deing to research from Capital Group
The stock market does tend to follow what Piper Sandler called a “jump, slump, and pump” progression
This cycle is consistent with a trading pattern that has emerged through Trump’s presidencies, outlined by Jeffery Hirsch, a longtime market strategist and the editor of the Stock Trader’s Almanac
Similarly, Oppenheimer analysts highlighted a “sell in July for a big October buy” strategy that also signals stock volatility ahead
