US GDP Acceleration in Q1 2025 Reveals Surprising Economic Resilience Amid Iran War Tensions

U.S. GDP accelerated to a 2.8% annualized rate in Q1 2025, surprising markets and reinforcing a narrative of economic resilience despite the Iran war. Strong consumer spending (+3.1% q/q), rising business investment (+4.5%), and higher government/defense outlays supported growth. Markets responded with risk-on positioning: the S&P 500 gained 5.7% in Q1 while the VIX averaged 18.5. Oil (WTI) averaged $82/bbl (+12% from Q4), lifting energy and defense stocks but also adding input-cost risks. The dollar strengthened, tempering import inflation but weighing on exports. Fed policy eased financial conditions after a January pause at a 5.25% federal funds rate, with markets eyeing potential cuts later in 2025. Overall, the piece presents a cautiously optimistic market outlook — solid near-term demand and corporate activity underpin equities, but geopolitical escalation, higher oil, cooling labor indicators and elevated mortgage rates pose clear downside risks.