Looking at the chart, the takeaway is subtle, and widely misunderstood. Oil and stocks do not have a clean dependable relationship. Using financial jargon, they are NOT highly correlated over time. What this means, sometimes they move in the same direction and diverge other times, more importantly, occasionally do the exact opposite of what the headlines would have you believe.
Let’s walk through a bit of the timeline.
- From 2010 to 2014: Oil is elevated and quite volatile, the stock market grinds steadily higher.
- Oil collapses in 2014–2016 due to OPEC oversupply: What do stocks do? Stocks barely blink.
- Then COVID hits: Oil briefly goes negative, as does the stock market for very short-period of time, then equities recover quickly and go on to make new highs.
- Russia–Ukraine spike in 2022: Oil surges and stocks struggle.
- From the peak in 2022 – early 2026: Oil trends lower while equities rally sharply, albeit with a brief draw-down in early 2025.
- Currently: With current Iran situation, oil has spiked while the market has held up fairly well with just a very modest pull-back.
What’s consistent here—there is no consistent pattern here.
That’s not just visual, it’s backed by data. The correlation between oil and stocks is unstable and can flip between positive and negative depending on the geopolitical and economic environment.
More importantly, what’s driving oil matters more than oil itself.
Demand-driven moves (strong global growth) can lift both oil and stocks, while supply shocks (wars, embargoes) often hurt stocks (in the short-term) while pushing oil higher.
And here’s the key point: The stock market doesn’t care about oil prices per say, it cares about what oil prices signal.
-Paul R. Rossi, CFA