U.S. stocks are pressing higher even as the Iran war disrupts oil flows and pushes energy costs into a volatile new range, creating a widening gap between investor optimism and warnings that the shock could feed inflation, squeeze businesses and raise recession risk.
The S&P 500 touched a new all-time intraday high of 7,230.12 on May 1, according to CNBC, despite a surge in energy prices since the U.S.-Iran conflict began on Feb. 28. Oil-price snapshots vary by timing and benchmark: CNBC reported Brent crude at $111.23 a barrel on Monday, CBS News said Brent briefly topped $126 on Thursday, and the BBC put Brent at about $110 after swings that took it near $120 and below $100. The different figures point to the same central issue: markets are moving through an unusually unstable oil shock.
Why strategists are worried
Amrita Sen, founder and director of Energy Aspects, told CNBC that global economies could be “sleepwalking” into a “pretty big recession” as investors underplay the consequences of higher energy costs. She described the mood in equity markets as “extremely misplaced euphoria,” arguing that the pressure is not limited to Asia and is likely to spread through industries that rely heavily on fuel, natural gas and oil-derived inputs.
The Strait of Hormuz is the main pressure point. The waterway normally carries a significant share of global oil and liquefied natural gas supplies, and several sources in the bundle describe it as effectively closed or severely disrupted. OPEC has pledged to increase production, but Sen cautioned that the move remains largely symbolic if it cannot replace lost supply quickly enough.
The concern is not only gasoline. Higher oil and gas costs can work through jet fuel, chemicals, fertilizers, food production and manufacturing. Jens Eisenschmidt, Morgan Stanley’s chief Europe economist, told CNBC that airlines are facing anxiety over jet fuel, U.S. gasoline prices are rising, and manufacturers are exposed even when their products use only small amounts of oil. He said pressures in the system are visibly increasing and warned Europe may be approaching a “day of reckoning.”
Supply buffers may be masking the full impact
Exxon Mobil Chief Executive Darren Woods said Friday that prices do not yet reflect the full scale of the disruption. He told investors that tankers already in transit, strategic petroleum reserve releases and commercial inventories have helped cushion the market early in the war, but said those buffers can run down if the Strait of Hormuz remains closed.
“There’s more to come if the strait remains closed,” Woods said, according to CNBC. He also said oil flows from the Persian Gulf could take one to two months to normalize even after the strait reopens, because tankers must be repositioned, backlogs cleared and cargoes delivered.
Exxon said its Middle East production would fall by 750,000 barrels per day compared with 2025 if the strait remains closed through the second quarter, and Woods said about 15% of the company’s total production had been affected by the closure. The company also disclosed that Iranian attacks on Qatar’s liquefied natural gas export hub damaged two production lines in which Exxon has an ownership interest.
Consumers and companies are already feeling the strain
The pressure is showing up beyond commodity screens. CBS News, citing AAA, reported that the average U.S. gasoline price reached $4.39 a gallon on Friday, up nine cents from the previous day and 34 cents from a week earlier. In the United Kingdom, a senior minister, Darren Jones, told the BBC that higher energy, food and flight-ticket prices could last at least eight months after the war is resolved, though he said price pressure was more likely than empty supermarket shelves.
Some energy companies are benefiting from the turmoil. BP reported first-quarter profit of $3.2 billion, more than double the same period a year earlier, after what it called an “exceptional” performance in its oil trading business. The BBC reported that BP’s customers and products division, which includes trading, generated $2.5 billion in profit, compared with $103 million a year earlier. At the same time, BP said production between April and June was expected to be lower partly because of disruption in the Middle East.
The next test is whether the Strait of Hormuz reopens, how quickly energy flows normalize and whether higher prices remain temporary or become embedded in broader inflation. Eisenschmidt said a swift resolution could allow the European Central Bank to look through the current spike, but warned that the window for that outcome is narrowing. Until the shipping route and the war’s trajectory are clearer, the market rally rests alongside a risk that has not gone away.
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