The true impact on the market is the duration of the conflict, as well as market expectations for that duration. A shift from perceived risk to actual escalation is likely to affect sentiment in the US stock market. While current headlines are dominated by the Middle East situation, AI-driven inflation may be the more critical driver of stock prices in the long term. However, everything depends on timing. The chief US equity strategist at Citigroup, Scott Chronert, noted that over the past 40 years, at least from a market perspective, the duration of military conflicts and market expectations for that duration have been the most important factors. Chronert emphasized that he does not underestimate the significance of the current Middle East crisis. However, in his US stock market outlook released on Sunday, he stated that the White House's presumed objective should be to end military operations as quickly as possible and contain the conflict to a limited scope. He indicated that the reaction in oil prices is evident, but it must now be added to the growing list of concerns troubling US stocks. These concerns include: Excessively aggressive capital expenditure in the artificial intelligence sector. The potential for AI's rapid adoption to disrupt a large number of business models. Consequent worries about the labor market. Increased unease stemming from signs of distress in the private credit and private equity markets. "The wall of worry that US stocks need to climb is getting taller and taller," Chronert warned. Furthermore, Chronert cautioned that a spike in oil prices—whether temporary or sustained—would influence the decision-making calculus of potential Federal Reserve Chair nominee Kevin Warsh. Rising energy costs could affect market expectations for a June interest rate cut, although the impact is not yet pronounced: the CME FedWatch Tool shows the probability of a cut has only decreased from 46% to 43%. The Citigroup strategist stressed that all these concerns impact market sentiment, but he also advised against an overly negative interpretation of events. Just last week, Chronert reaffirmed his expectation for S&P 500 earnings per share of $320 by 2026, a level above the market consensus. Given that recent corporate earnings have generally surpassed expectations, he now views this forecast as potentially conservative. He also pointed out that current valuations are relatively attractive. The group of stocks referred to as the "Elite Eight"—Nvidia, Amazon, Microsoft, Alphabet, Meta Platforms, Broadcom, Tesla, and Apple—have a price/earnings-to-growth (PEG) ratio at a 10-year low.