Market News

BY Kaili Killpack

It's a common belief: when oil prices rise, the stock market takes a hit. Higher fuel costs mean more expensive shipping and manufacturing, which could shrink company profits — right?

Not necessarily. On a recent episode of the "Women & Money" podcast, financial expert Suze Orman challenged this idea, telling listeners that oil and stocks don't follow a predictable pattern. "Sometimes people think there’s this inverse relationship between the stock market and oil," she said. "But history doesn’t back that up on any level."

Strong Economy, Strong Oil — and Strong Stocks

In fact, oil prices and the stock market may rise together. Orman recalled 2006 and 2007, when oil prices surged and the S&P 500 did, too. "The economy was roaring," she said, noting that high oil prices didn't slow the market.

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Why? Because rising demand for oil — used in shipping, travel, and manufacturing — can signal a booming economy. That economic strength can boost corporate earnings and lift stock prices.

Temporary Dips, Not Crashes

Orman pointed out that even when rising oil prices do cause market pullbacks, the effects are often short-lived. She recalled in 2011 that unrest in the Middle East drove oil prices higher and caused a brief market dip — but the downturn didn't last.

Her conclusion: there's no consistent correlation. "It all depends on what's going on," she said. "Just that simple."

What the Research Says

Some studies back up Orman's take. Research from the Federal Reserve Bank of Cleveland in 2008 found "little correlation" between oil prices and stock prices over time. While it's a common belief that rising oil prices will drag stocks down, the data doesn't support a reliable pattern. In some periods, stocks and oil prices have moved in opposite directions; in others, they've risen together or shown no relationship at all.

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A Brookings analysis by former Fed Chair Ben Bernanke in 2016 echoes this view. Looking at several years of data, Bernanke found that the relationship between oil prices and stock prices is highly variable — sometimes positive, sometimes negative — and often driven by external factors like global demand and investor risk sentiment. Even when accounting for those influences, the remaining correlation between oil and stocks was close to zero.

However, it seems short-term correlations can emerge during periods of economic uncertainty. A Reuters analysis from April reported that oil and U.S. equities were moving nearly in sync, with a one-month correlation reaching 0.9 — unusually high.

Analysts attributed the alignment to market anxiety over global growth and the economic impact of new U.S. trade tariffs. In these environments, investors may react to broad economic signals that influence both oil and stock prices at once. While not the norm, these moments highlight how policy shifts and growth fears can temporarily tighten the link between oil and equities.

Different Impacts Across Industries

While oil doesn't dictate the overall market, it can have a bigger effect on certain sectors. Transportation, for example, is heavily influenced by oil prices. Fuel is a major cost for airlines, shipping firms, and delivery services. When oil gets more expensive, those companies often see tighter profit margins. Conversely, when fuel costs drop, transportation stocks can benefit.

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Oil prices can also affect consumer behavior. Higher fuel costs may lead households to spend less on other goods and services. But the flip side is also true: falling oil prices can leave consumers with more money to spend elsewhere, potentially boosting other parts of the economy.

A Complicated Relationship

Ultimately, oil prices are just one piece of a much larger puzzle. Corporate earnings, investor expectations, interest rates, and supply chain trends all influence stock market performance. While energy costs matter — and can temporarily move in sync with stocks during periods of economic stress — they don't act in isolation. And they certainly don't guarantee a market crash.

As Orman summed it up: "That logic is just very simple, but it isn't true." Understanding the full picture means looking beyond oil.