Oil Prices Are Skyrocketing -- and 40 Years of History Point to a Huge Move in Stocks Over the Next 12 Months

For the better part of the last seven years, the bulls have been in full control on Wall Street. Since 2019, the S&P 500 (SNPINDEX: ^GSPC) has gained at least 16% each year, save for 2022. Meanwhile, the ageless Dow Jones Industrial Average (DJINDICES: ^DJI) and growth-focused Nasdaq Composite (NASDAQINDEX: ^IXIC) have also pushed to several record highs.

But history teaches investors that stocks don't advance in a straight line.

Since the U.S. and Israel began conducting military operations against Iran on Feb. 28, Wall Street's major indexes have swooned. At the same time, crude oil prices have skyrocketed.

Image source: Getty Images.

While this dynamic clearly has investors on edge, 40 years of history covering this exact scenario point to a huge move to come in stocks.

Patience has proved profitable when oil prices soar

Energy supply chain disruption is the primary concern associated with the Iran war. Following initial attacks, Iran virtually closed the Strait of Hormuz to oil exports. Approximately 20% of the world's liquid petroleum travels through the Strait of Hormuz daily. If this supply is constrained, the law of supply and demand states that the price of this in-demand good should rise -- and rise it has!

West Texas Intermediate and Brent crude oil prices have skyrocketed in the wake of this conflict, sparking concerns in the U.S. about higher energy prices, a potential uptick in the prevailing inflation rate, and the possibility that the Fed will consider interest rate hikes down the road.

But when oil price shocks have previously occurred, they've almost always been a buy signal for investors.

The S&P 500 has averaged +24% in the 12 months after an oil shock.

Crude prices have surged 20% in 48 hours just 8 times in the last 40 years.

Stocks were up in 7 of 8 instances.

History favors the bulls. pic.twitter.com/0jir405fq6

-- Phil Rosen (@philrosenn) March 13, 2026

According to journalist and Opening Bell Daily co-founder Phil Rosen via a post on social media platform X (formerly Twitter), crude oil prices have surged by at least 20% over a two-day period on eight occasions since 1986, including the latest move. The S&P 500 was higher one year later following six of these seven price shocks.

What's even more noteworthy is the magnitude of gains for the benchmark index following crude oil price shocks. On average, the S&P 500 was higher by 24% one year after a 20% or greater two-day surge in oil prices.

While the past can't guarantee what's to come with 100% accuracy, 40 years of history clearly point to a significant move higher in equities over the next year.

Image source: Getty Images.

The Fed is Wall Street's wildcard

Although historical precedent and long-term data strongly favor optimists, the Federal Reserve is a wildcard that historical oil price movements can't account for.

In February, Core Personal Consumption Expenditures (PCE) hit a 22-month high of 3.1%. This is, arguably, the favorite inflationary measure used by the Fed when making monetary policy decisions. With the Core PCE well above the Fed's 2% long-term target and the oil price shock not yet reflected in the prevailing inflation rate, it seems increasingly likely that the rate-easing cycle will be put on hold.

Typically, a wait-and-see approach wouldn't be a big deal. But with this being the second-priciest stock market in history, there's little margin for error and a built-in expectation from investors that America's foremost financial institution will continue lowering interest rates to promote lending.

If this oil price shock persists, it's possible that the Fed could trump 40 years of history.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.