US Markets Driven by Earnings and Stable Labor, Defying Geopolitical Tensions

US markets are driven by strong corporate earnings and a stable labor market, defying global geopolitical tensions. While investors hope for negotiation, unpredictable political rhetoric and potential oil price spikes pose risks, especially for emerging markets like India. Economies are better equipped to absorb shocks than in past decades, but caution remains advised.

The global financial landscape is navigating a complex web of cross-currents, with markets adopting a cautious "wait and see" stance as geopolitical tensions collide with a surprisingly resilient US economy. That is the assessment of Santosh Rao, Head of Research and Partner at Manhattan Venture Partners, who spoke to ET Now about the forces shaping markets right now.

Earnings, not fear, are driving US markets

Despite the noise from global hotspots, Wall Street is finding its footing in corporate fundamentals. "Right now, the earnings are really driving the US market," Rao said, pointing to a steady stream of quarterly results that have largely beaten expectations. The US labour market, while not booming, remains stable — what Rao describes as a "no hire, no fire" environment that has prevented any sharp economic deterioration.

The upcoming US jobs report is the next key data point markets are watching closely. If the numbers hold up, it could further reinforce the narrative of American economic resilience that has kept investor sentiment from turning sharply negative.

Geopolitical uncertainty: Posturing or a real deal?

The bigger question hanging over global markets is whether the current geopolitical tensions will find resolution through negotiation or escalate further. Rao noted that markets are currently giving the situation "the benefit of the doubt," operating on the assumption that some form of deal will eventually emerge.

However, he was candid about the unpredictability of the current political environment. "You really cannot make anything out of what Trump is saying at this point," Rao observed, adding that rapid policy reversals make it difficult for investors and businesses to plan with confidence. For now, markets remain news-driven — and positive headlines have been enough to keep stocks buoyant.

The risk of a longer-term recession is not off the table. If geopolitical disruptions persist and global growth slows significantly, the buffer provided by national reserves may not hold indefinitely.

Crude oil: The wildcard for India

For India, the most critical variable in this global equation is crude oil. Rao flagged that some analysts have pencilled in prices as high as $120 per barrel, with Goldman Sachs reportedly placing estimates even higher if the current disruptions extend beyond a month to six weeks.

"The path of least resistance is higher," Rao warned. "If this thing continues, you are going to see oil prices go up — and it is not good for the emerging markets, particularly India."

That said, Rao struck a note of measured optimism. Unlike the oil shocks of the 1980s and 1990s, today's economies are far better equipped to absorb energy disruptions. Countries have diversified their energy sources, improved fuel efficiency, and reduced their dependence on Middle Eastern supply — all of which act as natural shock absorbers.

The bottom line: For investors and businesses tracking global markets, the message from Rao is clear: resilience is holding for now, but the situation remains fluid. The combination of strong US earnings, an uncertain geopolitical backdrop, and rising crude oil risk creates a market environment where caution is warranted — and every headline matters.

India, in particular, should watch the oil price trajectory closely, as a sustained spike could put meaningful pressure on the current account, inflation, and broader economic growth.