Fundstrat Global Advisors head of research Tom Lee told Squawk Box Monday morning that the stock market is “very spring-loaded” for a recovery.

Lee had predicted March volatility followed by a bounce.

It didn’t play out that way.

The initial shock of the Iran conflict proved longer than expected, so stocks sold off and stayed down.

But Lee argued Monday that markets typically bottom in the first 10% of a war, and that the worst is likely behind.

‘Explosive’ Reaction If War Ends

The SPDR S&P 500 ETF Trust (NYSE:SPY) is at $657, around 6% off its January highs.

Lee said it wouldn’t take much to recover the gap, and that if the war ended unexpectedly, the market reaction would be “explosive.”

Polymarket traders currently price an 85% chance of a U.S.-Iran ceasefire by year-end, with over $15 million wagered on the conflict’s timeline. Traders give a 62% chance of a ceasefire by June 30.

Lee said a peace in the Middle East would carry significant future economic benefits.

Stimulus Dwarfs Oil Hit

Lee acknowledged the consumer pain from higher gasoline but argued the spending side of the war is larger.

Every $10 rise in gas costs consumers roughly $4 to $5 billion a month, he estimated. War-time defense expenditures are running at $30 billion a month and could rise to $100 billion.

On inflation, he drew a distinction between a shock and an episode.

If the conflict proves shorter, rising gas prices alone don’t mean expectations have become unanchored.

Holding rates steady makes sense for now, he said, adding that policy and the war trajectory matter more than the central bank.

Crypto Holding Steady

Ethereum (CRYPTO: ETH) and Bitcoin (CRYPTO: BTC) have been the second and third best-performing assets after oil, Lee noted when asked about digital assets.

Lee said investors who sold in March now face a tough call. The S&P 500 is only a few percentage points lower than its highs, and a surprise end to the war could send stocks sharply higher from here.

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