For much of the last three years, Wall Street’s bull market rally has been virtually unstoppable. Over the last six months, we’ve observed the benchmark S&P 500 (^GSPC+0.11%), growth-driven Nasdaq Composite (^IXIC+0.18%), and iconic Dow Jones Industrial Average (^DJI0.13%) touch psychologically important milestones of 7,000, 24,000, and 50,000, respectively.
But things have been far more challenging for investors over the last six weeks. The Dow and Nasdaq Composite both briefly dipped into correction territory, while the S&P 500 flirted with a double-digit decline. Although the immediate blame lies with uncertainties tied to the Iran war, it’s the longer-term implications for U.S. inflation that should have Wall Street on edge.
The Iran war is roiling Wall Street — and with good reason
On Feb. 28, U.S. and Israeli forces kicked off military operations against Iran. Shortly after this conflict began, Iran closed the Strait of Hormuz to most oil exports. This is a problem, given that approximately 20% of the world’s liquid petroleum travels through the Strait of Hormuz each day, according to the Energy Information Administration.
The law of supply and demand states that when demand for a good outpaces its supply, the price of that good will rise until demand tapers off. The reaction in the oil market has been swift, with crude oil prices skyrocketing in the wake of this virtual closure.
Gas prices in the US have moved up to $4.08 per gallon, their highest level since August 2022. The 36% spike over the last month ($3.00/gallon to $4.08/gallon) is the biggest we’ve seen in the past 30 years. pic.twitter.com/wWDEg2e38u
— Charlie Bilello (@charliebilello) April 2, 2026
Most consumers have felt the impact of higher oil prices at the gas pump. Over the last month, as of April 2, the national average price of a gallon of regular gas has surged by 36% to $4.08, per AAA. It’s been an even steeper climb for diesel, which has soared 46% to $5.51 per gallon.
While higher gas prices are known to pinch consumers’ pocketbooks, it’s the inflationary impact of this historic energy supply shock that could upend the stock market.