Oil Prices Break Past $100 Without Collapsing? Wall Street Strategist: Probability of U.S. Stock Market Entering Bear Market Extremely Low

Why Are Oil Prices Breaking $100 Yet U.S. Stocks Remain Resilient?

Despite the clouds of stagflation and the risk of unmet rate cut expectations, the resilience of the U.S. stock market has been surprisingly strong. Wall Street strategists do not see the warning signs of a major bear market yet.

CFRA investment strategist Stovall said, “Although oil prices have surged amid the Iran conflict, turbulence in the energy market is unlikely to cause a significant crash in the U.S. stock market.”

This war, now entering its third week, has led to the forced closure of the Strait of Hormuz, triggering the largest oil supply disruption in history and briefly pushing prices above $100 per barrel. Fears of rising inflation, slowing economic growth, and potential stagflation have led to sell-offs. But even so, the S&P 500 is still less than 5% below its all-time high of 7,002 points set in late January.

If the index falls below the 5% threshold this week, it will have been more than 47 days since reaching its new high, which is unusual compared to historical trends. Stovall noted that, on average, the S&P 500 takes about 28 days to decline 5% to 9.9% (early correction). A deeper correction of 10% to 19.9% typically takes around 80 days; a bear market of 20% or more averages 245 days.

In a report to clients on Monday, Stovall wrote: “While history is only a guide, since World War II, if the S&P 500 takes more than 40 days to enter a preliminary pullback, it has never actually entered a bear market.” This may give investors enough time to carefully assess whether the current crisis will truly lead to a sharp sell-off.

Stovall said that, although investors should not rule out the possibility of larger declines, the fact that it has taken so long to even begin a preliminary correction sends a clear signal: the market is “very likely” to experience some degree of pullback, but the chances of a major bear market are very low.

Nevertheless, CFRA’s energy team still expects oil prices to continue rising and stay above $100. The risk of accelerating inflation from soaring oil prices could cast a shadow over the Fed’s rate cut prospects this year, but Wall Street remains quite optimistic, believing that high energy bills will not cause a devastating blow to stocks.

“Investors are now accustomed to navigating uncertainty rather than waiting for the fog to clear,” Morgan Stanley’s trading desk said in a report, adding that the market’s fundamentals remain strong. The team pointed to several positive factors: robust earnings momentum, ongoing investments in AI infrastructure, and generally supportive government policies.

Morgan Stanley traders wrote: “For now, the market seems eager to continue playing its game, gradually digesting this complex environment. If the past few weeks have taught us anything, it’s that patience and a long-term perspective remain the most valuable assets for investors. Stay flexible!”