Iran War Overshadowed? Corporate Earnings and Hardware-Software Stock Split Draw Investor Focus

The S&P 500 closed lower for the week as fading hopes for a quick resolution to the Iran war and a broad sell-off in software stocks weighed on investor sentiment, despite mixed corporate earnings results.

Stocks fell in choppy trading on Thursday as investors grappled with stalled progress in the Iran conflict and a mixed bag of quarterly reports, according to Reuters. The Dow Jones Industrial Average dropped 179 points, the S&P 500 lost 0.41%, and the Nasdaq Composite fell 0.89% amid renewed concerns over the Strait of Hormuz blockade.

Two days after President Trump extended a ceasefire with Iran, the two countries remained at a stalemate over the Strait of Hormuz, with the U.S. Maintaining its blockade and Iran also blocking the waterway as both sides vie for control. Oil prices rose on the ongoing shutdown, signaling investor expectations that the closure will endure.

The software sector experienced significant pressure, with the iShares Expanded Tech-Software Sector ETF (IGV) falling nearly 6% on the day and down 22% year-to-date, despite bouncing off earlier lows. The sell-off followed earnings reports from ServiceNow and IBM, which were in line with estimates but failed to alleviate broader concerns about AI-driven disruption in the industry.

While ServiceNow’s results were in line with forecasts, investors expressed concern over the company’s decision to maintain full-year guidance excluding its recent acquisition of cybersecurity firm Armis. IBM also reported in-line earnings but offered little optimism, contributing to skepticism about near-term growth in enterprise software.

Nasdaq Composite led all three major indexes lower, closing down 0.9%, while the S&P 500 declined 0.4%. The Dow Jones Industrial Average also slipped, reflecting broad-based caution across technology and industrial sectors.

Jim Cramer noted in his Sunday column that the market faces multiple competing pressures — from the Iran war and oil volatility to software valuations and earnings uncertainty — describing it as a “visceral moment” where losses mount quickly for those on the wrong side of trades. He observed that despite bearish sentiment, the S&P 500 remained only 2.3% below its January 27 all-time high, suggesting resilience amid conflicting forces.

Morgan Stanley analysts highlighted that the Iran war’s energy shock has revived stagflation concerns, increasing the risk that stocks and bonds could decline together. In this environment, they recommend selectively adding to oversold, high-quality stocks, rotating into industrials and materials, and maintaining diversifiers such as gold and REITs.

The broader market dynamic reflects a split between hardware and software stocks, with semiconductor-related investments seeing relative strength amid AI infrastructure demand, while pure-play software firms face pressure over growth sustainability and valuation concerns.

As of April 26, 2026, investors continue to monitor diplomatic developments in the Iran conflict, upcoming earnings reports, and sector-specific trends in technology, particularly the divergence between AI-enabling hardware and software application providers.