For the better part of the last 17 years, the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) have been motoring higher. All three indexes performed particularly well during President Donald Trump’s first, non-consecutive term in the Oval Office, with respective gains of 57%, 70%, and 142% for the Dow, S&P 500, and Nasdaq.
However, Wall Street’s major indexes may be cracking due to the Iran war.
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On Feb. 28, U.S. and Israeli armed forces commenced military operations against Iran. Following these actions, Iran has virtually closed the Strait of Hormuz to oil exports. Approximately 20% of the daily petroleum liquid used globally passes through the Strait of Hormuz.
In just a shade over one week, the April contract for West Texas Intermediate crude oil surged from a close of $67.02 per barrel (Feb. 27) to an intra-day peak of $111.24 per barrel on Sunday, March 8, representing a 66% increase. It’s the fastest surge in oil prices observed in more than 40 years.
While most folks are likely seeing the tangible impact of higher crude oil prices at the gas pump, there are far bigger implications for the U.S. economy and stock market.
Historically, parabolic moves in the spot price of oil have correlated with periods of weaker consumer spending, higher inflation, and rising unemployment.
Inflation is, arguably, the bigger concern. The Federal Reserve is in the midst of a rate-easing cycle, and the prospect of lower interest rates has been powering a historically expensive stock market higher. This surge in oil prices may completely remove any chance of a rate cut in 2026.
But can a historic move in oil prices lead to an equally jaw-dropping move lower in the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite?
On the day the Iran War began, Carson Group’s Chief Market Strategist, Ryan Detrick, published a data set on X (formerly Twitter) that outlined the performance of the S&P 500 following more than 40 major geopolitical events since 1940.
