US stock markets ended the first half of 2026 on a high note, delivering their best gains in years despite a volatile start.
The rally was driven by easing US-Iran tensions, surging demand for artificial intelligence (AI) technology, and stronger-than-expected corporate earnings.
AI stocks lead the rally
The Dow Jones Industrial Average rose 8.9% since the start of the year, its best first-half performance since 2021.
The S&P 500 wrapped up Q2 with a 14.9% gain, its strongest quarterly rally since 2020. The index gained about 9% year to date.
Nasdaq 100 surged nearly 19% year-to-date after recording an 18% quarterly jump, its second-best quarter in about 25 years. The Russell 2000, which tracks smaller companies, climbed 21%, marking its strongest six months since 1991.
AI-driven chipmakers led the rally, with the Philadelphia Semiconductor Index soaring 80% during the quarter. Sandisk surged 764%, while Micron Technology, Intel, and Western Digital also posted triple-digit gains.
What drove the rally?
Markets fell nearly 10% by late March amid the US-Iran conflict and concerns that oil shipments through the Strait of Hormuz could be disrupted. Sentiment quickly improved after both countries agreed to halt attacks and allow commercial vessels to transit the waterway safely, easing fears of a supply shock.
Investors also remained confident that AI will continue driving strong earnings for technology companies. Chipmakers such as Nvidia, AMD, and Intel led the rally as demand for AI infrastructure stayed strong.
Corporate earnings further boosted investor confidence. According to FactSet, 85% of S&P 500 companies beat Wall Street estimates, the highest second-quarter success rate in five years. Analysts now expect 23% earnings growth this quarter and forecast further gains for the broader market over the next year.
What to watch next?
Attention has now shifted to upcoming US jobs data and comments from Federal Reserve Chairman Kevin Warsh. Investors hope these updates will provide clues on inflation, interest rates, and the outlook for the world’s largest economy during the second half of 2026.