So, you are telling me that our continent is energy self-sufficient and yet, last week oil screamed higher faster than we have ever seen ? Or that all that new Permian Basin oil doesn’t matter? Or that cars guzzle a lot less now than they did in previous oil shocks? Short term, the answer is, sadly, yes. It doesn’t matter because our country is based on free enterprise. We are not a command economy. The president of the United States, even this president, cannot decide that Canada has to send all of its exports here. He cannot block the some 10 million barrels of crude and refined products we send overseas every day. If he did, theoretically we would be immune from supply shocks elsewhere. The “theoretically” stems from the possibility, one day, of having enough refinery capacity to match the type of oil we pull out of the ground and send internationally. Our refineries still need imported crude , too. We do not have a closed-loop oil market in this country. It is open looped. The U.S. oil standard, known as West Texas Intermediate crude , trades at a discount to global benchmark Brent crude . But our companies can sell at the higher world price if they want to, so the two are intertwined. We are not going to get our price to decouple unless the president bans all exports, and we put up refineries overnight that cater to the light sweet crude found in places like the prolific Permian. So, forget about energy independence when it comes to the oil price. What you see with the posted price every day is what you get. The U.S.-Iran war-fueled rally is not “phony” based on a giant short squeeze, although there is a lot of squeezing going on. But there is good news. The world can, over time, handle a closure of the Strait of Hormuz , a vital waterway for global crude supplies leaving the Persian Gulf. The world does have the spare capacity and the equipment to boost production rather quickly. But the producers can’t flick a switch, and it’s only been a week of war. That’s why talk of $150 or even $200 barrel a day oil will be in the news over the next few weeks if this Middle East conflict continues. Steel yourself; the pessimists will have gravitas. Some of the talk of $150 to $200 will just be of the usual scare variety. I can see the parade of bears who will be on display with their glum faces and their sheen of expertise, a veritable firehose of negativity. The usual gang of never-to-be-defrocked charlatan “experts” who had a couple of good years and nothing more will shout negativity to the rooftops until their larynx’s give out. Good for their flagging businesses, I figure. Why will their voices will resonate? Why won’t they be refuted easily? Because of 2022, that’s why. Consider what happened in late February and March 2022, when Russia invaded Ukraine . As soon as Russia moved on Ukraine, traders presumed that an oil embargo of Russia would remove some 7 million barrels a day from the world supply (including both oil and other petroleum products). That caused Brent crude to spike from about $95 a barrel to $139 in mere weeks . It took roughly six months for oil to return to pre-war prices as Russian oil seeped into the market and production ramped globally. Now that the Strait of Hormuz is effectively closed, it will remove double the amount of oil that traders feared we would lose in a Russian embargo. That’s right. Last year, over 14 million barrels a day traveled through the Strait on average. Now it simply can’t be brought to the market. It is stranded. Just gone. For now. So, it is reasonable to believe that if oil could spike from $90 to $139 in a few weeks in 2022 on a loss of 7 million barrels, it could go up a lot more on a loss of double that amount. That’s why a price of $150 or $200 a barrel has to be considered possible. Or, at least, you will be hearing and reading about that range from commentators starting next week, and it will be within the realm. No one will scoff at these projections. They cannot be shot down because of what happened in 2022. Now, will it stay there? No one knows. It is as if something as predictable as the closure of the Strait was not thought about by President Donald Trump before the war started. It’s not like he completely refilled the Strategic Petroleum Reserve. It’s almost a little more than half filled, having been drained down by President Joe Biden to help stop the 2022 price surge. That gambit actually worked back then. It helped to slow the increase and ultimately blunt it. This president has downplayed the need to tap the SPR this time around. But when it comes to oil, ultimately, what goes up, must come down. That’s because oil at $150 causes rapid demand destruction, followed by slow supply increases and, ultimately, a return to where we started. The operative term is “ultimately.” We can’t determine when that will be. Which means, to me at least, that without a plan, just using the 2022 scenario, we are going to be stuck with much higher prices, perhaps for as long as the next six months — the time it took for the market to calm after the Russian invasion of Ukraine — unless the Strait can be opened quickly. The 2022 paradigm was pretty nightmarish when you think about it. The S & P 500 fell about 25% from its January 2022 closing peak to its October closing low, brought on by both the spike in oil and a Federal Reserve rapidly hiking interest rates to squash surging inflation. The consumer price index got a s high as 9.1% in June 2022 , which President Trump says was the worst inflation in U.S. history, although it was the highest since 1981 . Counterfactual. Now we don’t have the Covid supply constraints or a Fed that is about to jack up rates at a historic pace, which in 2022 included four straight supersized 75 basis point hikes . But oil at $150 to $200, for even a short period of time, could throw a lot of the world into a pretty severe economic slowdown. The U.S. economy is two-thirds service, one-third industrial. Still, those people who live in either of these two orbs will see prices go higher. Oddly, though, an oil spike like that, while inflationary, would reduce economic activity in this country and give Trump’s Fed chair nominee , Kevin Warsh, cover to cut rates when he (likely) succeeds Chair Jerome Powell, whose term expires in May. Don’t get all that bearish about stocks because of oil. Our market reacts to rate cuts more than any other stimulus. Still, I want you to be realistic. We had $60 a barrel prices when the world produced in the ballpark of 105 million barrels a day. If you take offline 14 million barrels a day from the closure of the Strait, there will be consequences that certainly boost oil well beyond the $100 we are facing now. Consider it a given. So, does it mean that we should be worried about something at least somewhat like 2022, maybe a big spike without a harsh Fed? It’s possible, because it’s not clear whether the White House can quickly resolve the Strait snarl. Energy Secretary Chris Wright said Sunday on Fox News that the U.S. is working to limit Iran’s “ability to strike with missiles and drones, and that rate of attrition will increase in the coming days.” He continued, “So we’ll be cautious, we’ll be careful, but energy will flow soon.” We also hear about insurance , but no takers. We hear about the U.S. Navy being used to escort tankers through the Strait. But “opening” it doesn’t necessarily mean that it will be used. Too fraught. Unless the Navy is going to pilot the oil tankers themselves, we have to presume we are going to $150 to $200, at least in terms of chatter — if not reality. But, like so many of the travails that have faced our markets over time, if you sell Monday based on this negative scenario that I have just traced, history says you will regret it. Go back to 2022 again. It would have been terrific to sidestep the decline in the S & P 500. You would have had to sell on day one of the Russian incursion in February and then get back in at the bottom — as if it’s easy to know when that is in the moment. While not the official bottom of 2022, it turned out that June of that year was a good time to get in because that was pretty close to the lowest levels of the year. But how would you have known? There was no real sign of anything about to go right. Oil was still high. The Fed was still tightening. It would have taken a level of clairvoyance well beyond the ken of even the best traders with the best machines. Far better just to have ridden that one out, even with the Fed’s dramatic moves in front of you. I think the same is true now. That’s because the loss of those 14 million barrels has to be considered temporary no matter what. Oil will find its way into the market somehow at dramatically higher prices, both from the Mideast and from around the globe. It’s a bad reason to sell stocks — even if it might be a good reason to expect a decline — simply because you will not be able to predict when the decline is over and the rally will resume. And if the pressure on stocks during the war is really just about the price of oil, then the rally should eventually resume. So what do you do? I think the main thing you can do is lose your fear of the $150 to $200 circes. They will do their best to scare you out. Think of it as their job. Your job, as I make clear in “How to Make Money in Any Market,” is to stay in. You can raise some cash if you want, like we have done for the Club, but now that the market is basically oversold, according to my trusted S & P Short Range Oscillator , we are more interested in buying rather than selling. We recapped our week of trades in a piece Saturday for members. The thing you must not do is panic. My estimate of a 14 million barrel removal because of the Strait closure represents the maximum that can be taken off. That we could not see a few million barrels made up almost immediately by other countries simply can’t be ruled out. So, once the oil market settles, the rip will be sold and oil will come back down. If you get out of the stock market, I can promise you that you will be left behind by the rally that comes from lower rates and lower oil. I know it is a big hump to peer over, especially as we deal with the fears that come from worries of a crisis in the multi-trillion private-credit market, something I hit in a recent Sunday think piece . But you must do so. No, it is not bullish to see oil go to $150 or $200. But the response to those market prices is bullish, so bullish even that to leave ahead of time is to risk missing out on the opening of the Strait, or the opening of the spigots worldwide, while rates are coming down. So, once again, steel yourself. Like so many other times since 1981, get ready for the sell-off that you can’t really avoid without missing the move up in its aftermath. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. 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War disruptions may send oil to $150 to $200 a barrel. Here’s my advice for stock investors
Mar 8, 2026
