Brent crude's 60% surge puts S&P 500 on path to losses
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- Brent crude has surged over 60% in days, jumping from $72.48 on February 27 to $119.50 on March 9, driven by fears of supply disruption from US-Iran tensions over the Strait of Hormuz
- Sheth's analysis of 11 similar oil spikes since 1987 found the S&P 500 has declined an average of 3.5% over six months, 7.3% over one year, 8.3% over 18 months, and 7.2% over two years
- The probability of losses grows over time: the S&P 500 was negative in 5 of 11 cases after six months, rising to 9 of 11 after one year and 10 of 11 after 18 months, showing the damage plays out with a lag
- Sheth described sharp oil spikes as a "tax on economic growth" that pushes up transportation and manufacturing costs, fuels inflation expectations, and increases bond yields
- Sheth warned that "when oil doubles, earnings expectations usually don't," creating a mismatch that leads to multiple compression in US equities
- The analysis flags particular risk for technology-heavy indices and global portfolios sensitive to interest rates and valuation changes, with India's markets also noted as vulnerable to sustained high oil prices
Why it matters: The market pain from a 60% crude surge in days isn't a quick sell-off — it bleeds. Across 11 similar spikes since 1987, the S&P 500 was negative in 10 of them 18 months later, because oil's drag on inflation, bond yields, and corporate margins takes time to feed through. That puts rate-sensitive sectors like tech and oil-importing markets like India in the crosshairs.
