Global Investors Bet Big on International Stocks — Then the Rally Got Torched Before Takeoff

The market’s favorite global trade has run into a wall. The Iran war in late February derailed the expected breakout for international stocks, with heavier losses overseas while the US held up better. Oil prices are driving the divergence, with strong US production acting as a buffer as Europe and Asia absorb the shock, while energy names like APA CorpAPA

and Valero EnergyVLO

stand out as rare winners.

• Since the conflict, non-US equities have fallen around 10% compared to about 5.4% for US markets, with Germany’s DAX down 11% and Japan’s Nikkei off 9.3%.
• Rate cut bets are fading quickly, with markets now pricing in a ~30% chance of a Fed hike by Oct. 2026, up sharply from just 6% a day earlier.

Still, not everyone’s bailing: Angeles Investments’ Michael Rosen added international exposure earlier this year, then reversed within two months, saying the conflict made it nearly impossible to make a confident call. Others think this is temporary and that once tensions ease, international stocks could bounce back. Meanwhile, valuations still look attractive, with many global companies trading around 13x forward earnings, about half the S&P 500, plus ~4% dividend yields, suggesting this may be more opportunity than a red flag.