S&P 500 PE looks cheap, but high oil prices still pose a threat

Wall Street’s rally is underpinned by a relatively low S&P 500 forward P/E (20.8x), near its one-year low, and rising earnings estimates—largely driven by AI optimism—making stocks appear cheap despite geopolitical risks. However, persistent disruptions around the Strait of Hormuz and elevated oil/jet-fuel prices have prompted warnings from many companies and could sap consumer spending and corporate margins if prolonged. About two-thirds of S&P 500 firms reporting since April flagged energy-cost risks (vs ~17% in Jan–Mar). Key downside triggers include a longer Iran conflict, supply-chain hits to profits, or AI-related earnings disappointment that would reverse the valuation support. Overall, the piece frames the market as reasonably valued on fundamentals but vulnerable to energy-driven shocks and execution risk around lofty earnings forecasts.