* US stock indexes return to record levels despite Iran

war

* P/E multiples down as tech-led earnings expectations

rise

* More firms warn high oil prices could hit results

By Noel Randewich and Caroline Valetkevitch

April 22 (Reuters) -

Wall Street has roared back to record highs even as

uncertainty over the conflict in Iran lingers, a risk

highlighted by a steady drumbeat of CEO warnings about the

economic toll of a prolonged period of high oil prices.

The reason? Stocks look cheap. The S&P 500 is trading at the

equivalent of 20.8 times its constituents' expected earnings

over the next 12 months. That price/earnings ratio is near its

lowest in a year, suggesting U.S. stocks are a better buy now

than at the start of 2026, when the benchmark traded at over 22

times earnings.

"Investors and market participants are expecting the war

with Iran to end relatively quickly, and so they are discounting

the long-term risk of the impact of the war. At the same time

the U.S. consumer and economy continue to perform strongly,"

said Oliver Pursche, senior vice president at Wealthspire

Advisors in Westport, Connecticut.

Currently, the Strait of Hormuz remains largely closed to oil

tankers as a two-week ceasefire is set to expire, while

Washington and Tehran appear far from an agreement to resolve

the conflict.

About two-thirds of S&P 500 companies that have reported

quarterly results since the start of April have voiced some

degree of concern about energy prices during their analyst

conference calls, according to a Reuters review of transcripts.

By comparison, around 17% of S&P 500 companies reporting results

between January and March mentioned concerns about energy

prices.

On Tuesday, GE Aerospace CEO Larry Culp told Reuters the

company would have raised its forecast if not for the current

uncertainty, citing a strong first quarter and visibility into

the second. The Ohio-based company said its outlook assumes a

more cautious second half, including the risk that airlines

scale back maintenance work, delay engine shipments and cut

spending if activity weakens. GE shares fell 6%.

GREAT EXPECTATIONS ON WALL STREET

Despite the pullbacks in GE and a handful of other firms

expressing caution, analysts and portfolio managers say stock

buyers are taking comfort in how cheap the market looks, based

in large part on expectations that earnings will surge this

year.

The valuation is set to be tested over the next few weeks as

investors weigh whether rising profit estimates can hold up

against concerns about high energy prices. The biggest potential

risk "comes from the outcome of the war with Iran, particularly

if consumer spending drops as higher energy prices and higher

prices in general begin to sap consumer spending," said Rick

Meckler, a partner at Cherry Lane Investments in New Vernon, New

Jersey.

Potential supply chain disruptions could also hit earnings,

he said.

The market's modest P/E multiple is not the result of

falling stock prices. Rather, analysts have rapidly increased

their earnings expectations, largely because of optimism about

artificial intelligence. Any widespread failure by companies to

meet those high-bar forecasts could quickly make U.S. stocks

look expensive, undermining a key support for the recent rally.

KEY RISKS TO A SHARP RALLY

While the S&P 500 has gained about 4% year to date,

expectations for 2026 year-over-year earnings growth have leapt

from 16% in early January to almost 20% last week, according to

data from LSEG I/B/E/S. Technology companies account for the

bulk of that increase, along with energy and materials

companies.

Several companies reporting results in recent days have

already flagged that high energy prices could impact their

costs, demand for their products and the broad economy. Other

heavy hitters reporting this week include Tesla, Intel ( INTC )

, Procter & Gamble ( PG ) and American Express ( AXP ).

Delta Air Lines ( DAL ) earlier this month cited soaring jet

fuel prices as the company pulled all planned capacity growth

for the current quarter and forecast profit below Wall Street

expectations. Some companies noted the risk from high energy

prices but said it was not yet a major concern. During its call,

PepsiCo ( PEP ) said it typically hedges energy-related costs through 6

to 12 months.

The benchmark's PE has ticked up from as low as 19.4 in

early April, but it remains very close to its 10-year average of

about 19. The last time the S&P 500 traded at these levels was a

year ago, when global markets tumbled following U.S. President

Donald Trump's Liberation Day tariff announcements.

The potential for Wall Street's AI heavyweights to miss

investors' increasingly high expectations is another key risk to

the market's recent rally. The PHLX chip index has surged

over 25% in April due to expectations of continued strong demand

from the buildout of AI data centers. Any sign that AI is not as

strong as expected could reverse those gains.​

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