By Intense Life Desires 
The S&P 500 (SNPINDEX: ^GSPC) dropped 9% from its peak in March as the Iran conflict drove oil prices higher. That sparked a flight to safety. Investors rotated away from risky stocks in favor of U.S. Treasury bonds, money market funds, and other safe-haven assets.
The S&P 500 has already recouped its losses, but the rebound may be in peril. The Iran conflict has not been resolved, and energy costs are still climbing. Last week, gasoline prices reached an average of $4.25 per gallon in the U.S., the highest level since the summer of 2022.
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In fact, the average gas price has only topped $4 per gallon in 44 weeks during the last three decades, which is less than 3% of the time. And the S&P 500 has typically notched double-digit losses over the next six months.
Here’s what investors should know.
History says the S&P 500 could drop 11% in the next six months
The average U.S. gas price (across all grades) hit $4.25 per gallon during the week ended April 27, according to the U.S. Energy Information Administration. That means gasoline prices have risen about 45% year to date, reaching levels last seen in August 2022.
What does this mean? Elevated gasoline prices reduce consumers’ purchasing power, not only because they spend more at the pump, but also because businesses pass along price increases related to higher transportation costs. Consequently, high gasoline prices are usually bad news for the stock market because consumer spending is the primary driver of economic growth.
Indeed, average gasoline prices topped $4 per gallon in just 44 weeks since 1993, and the S&P 500 has declined by an average of 11% during the six-month period following those incidents. In other words, history says the index is headed toward stock market correction territory in the coming months.
Elevated oil prices could tip the U.S. economy into a recession
The Iran conflict has effectively closed the Strait of Hormuz, a waterway in the Persian Gulf that serves as a key transit route of global oil supplies. Its closure has pushed Brent crude oil (an international benchmark) above $100 per barrel for the first time since 2022. For context, prices started the year around $65 per barrel.
Martijn Rats at Morgan Stanley says the price increases could have been transitory had the war ended swiftly, but that outcome is no longer possible because supply disruptions have moved beyond logistics into production. Damaged infrastructure and storage constraints have forced suppliers to cut production, and it will take time to ramp up again.