Oil Shock Jolts American Stocks into Driver’s Seat..For Now
A $10 spike in the price of oil, a dramatic drop in global equities and a rush to safe haven assets. So, why has the U.S. stock market appeared resilient at a moment when international equities have been outperforming year-to-date?
It’s not about oil supply risk. It’s about price risk. The United States is the largest consumer of oil in the world. At first glance, it may seem obvious that higher oil hurts Americans, but the nuance is in the source of the risk.
The United States is not meaningfully exposed to oil from Iran, or, more broadly, the Middle East. It sources the vast majority of its oil imports from Canada and Mexico, with 4% coming from Saudi Arabia, and is now the world’s largest net exporter of oil. Meanwhile, 85% of Iran’s exports have been going to China.
That doesn’t mean Americans are insulated from higher gasoline prices. But energy independence means there is a lag before it shows up in prices at the pump, which makes it easier to weather short-term volatility.
In prior geopolitical shocks, the fear was scarcity. Would the barrels arrive at all? Today, the risk premium is embedded in the price, driven less by lost production and more by transit route uncertainty.
That’s how the stock market can very quickly take its cue from oil, likely on worries that eventually, should the price shock sustain, it can feed into the cost of manufacturing goods and transportation. Eventually those costs may need to be passed onto the consumer, which could result in demand destruction.
Jitters
A good way to measure the fear is through the correlation between oil and stocks. As risk assets trade on global growth, the default is to rise together. If Americans are making good wages, spending, driving their cars and investing, then in theory, both oil prices and the stock market should gradually rally.
But when oil price increases are driven by geopolitical risk, rather than demand, they have a disproportionately negative impact on equities and economic confidence. And that’s when the traditional relationship breaks down. At the end of the day, though, the breakdown is episodic, not structural.
U-turn
Driven by encouraging global growth signals, fears of lofty megacap tech valuations, artificial intelligence disruption concerns and American foreign policy, investors have flocked to international markets since the start of 2026. In the week following the military operation, American equities have outperformed their international peers, reversing the year-to-date trend. By contrast, the United States – now a net energy exporter – sits in a fundamentally different position given its physical distance from the conflict, its North American energy sources and the defensive nature of its stock market.
Rick Barragan is the Managing Director,
Los Angeles Market Manager, for
J.P. Morgan Private Bank.
[email protected] | (310) 860-3658
privatebank.jpmorgan.com/los-angeles
Source: “Oil shock jolts American stocks,” Kriti Gupta, executive director, global investment strategist, Justin Biemann, global investment strategist, March 6, 2026.
