Stock market bulls should show a little more caution, given how past oil price shocks have impacted the economy.
Every US recession, excluding the COVID-19 pandemic, was preceded by an oil price shock, BCA Research chief global strategist Peter Berezin said in a new note (see chart below).
“The current macro environment is a toxic brew of many of the same vulnerabilities that haunted the global economy in the lead-up to past recessions: Rising oil prices, an unsustainable tech capex boom, elevated equity valuations, excessively high homes prices, and brewing stresses in private credit and other parts of the financial system,” Berezin wrote.
He added, “Stocks look increasingly oversold in the very near term but will still finish the year below current levels.”
Read more: How oil price shocks ripple through your wallet, from gas to groceries
Since the launch of Operation Epic Fury on Feb. 28, global oil prices have undergone their most violent surge since the 1970s. The conflict triggered a de facto closure of the Strait of Hormuz, a vital route for 20% of the world’s daily oil supply, causing an immediate and massive “war premium” to be baked into every barrel.
Brent crude oil (BZ=F) prices are up 45% to more than $100 per barrel, with Citigroup not ruling out $150 per barrel. US gas prices have, on average, crept up to $4 per gallon.
“[Higher gas prices are] absolutely recessionary in the short term,” former Trump administration insider Gary Cohn said on Yahoo Finance’s Opening Bid.
“There’s nothing more instantaneous to a consumer than standing there holding down the gas nozzle and watching the numbers tick on the pump,” he said. “And if they were paying $80 a week ago, and they’re paying $85 this week, and they were paying $60 a month ago, they know that ‘I lost $20 of disposable income in filling up this tank of gas,'” Cohn added.
Read more: What an extended war with Iran could mean for gas prices
Numerous cracks in the economy and markets — in part triggered by surging oil prices — have begun to surface.
The University of Michigan’s preliminary consumer sentiment reading for March fell to 55.5, its lowest level of 2026. Interviews conducted before the strikes on Iran showed rising consumer optimism, but the data collected in the nine days following the military action “completely erased” those gains.
Expectations for personal finances fell 7.5% nationally, a drop that stretched across all income levels and political affiliations. Meanwhile, flash PMI manufacturing surveys for March indicate a sharp slowdown in activity.