why the current higher gas prices are not showing in stock market ?
This is actually a really important question, and the honest answer is: it is starting to show — just with a lag. Here's why the lag exists and what's changing right now.
First, the scale of the oil shock
Oil prices have surged more than 50% since a U.S.-Iran conflict began on February 28, driven by disruptions to the Strait of Hormuz. Brent crude is currently trading around $107-108 per barrel. That's a significant shock by any historical measure. CNBCCNBC
So why hasn't the stock market crashed?
There are several reasons, and they interact:
1. Q1 earnings were reported before the oil shock hit fully
The strong Q1 earnings we discussed were largely locked in before energy costs had time to seep into margins. An analyst at Energy Aspects put it bluntly: "They are not going to be great nearly to the same extent in Q2." The stock market was celebrating backward-looking results while a forward-looking cost problem was building underneath. CNBC
2. Markets initially bet on a quick resolution
The market narrative through April was that the Iran conflict was de-escalating. A ceasefire was announced on April 7-8, and Iran's foreign minister declared the Strait of Hormuz open on April 17, prompting an 11% one-day decline in oil prices. Within ten days, however, the diplomatic picture had reversed. Markets priced in the good news but not the reversal. Crestwood Advisors
3. The economy is less oil-sensitive than it used to be
The oil intensity of U.S. GDP has declined by more than 50% since 1973 — meaning an identical oil price shock today produces a meaningfully smaller drag on GDP than it would have produced fifty years ago. So the market isn't wrong to discount the oil shock somewhat — the U.S. economy genuinely handles high oil better than it once did. Crestwood Advisors
4. Tech and AI are dominating the index and don't use much oil
The S&P 500 is heavily weighted toward software, cloud, and semiconductor companies whose direct energy costs are relatively low. A $100+ oil price barely dents Alphabet or Meta's margins. It devastates airlines, chemicals, and logistics — but those sectors have smaller index weights.
But here's what's changing — cracks are appearing
Just yesterday, global bond markets tumbled sharply, with US 10-year yields rising 12 basis points to 4.6% — the biggest weekly jump since Trump's tariffs roiled markets in April 2025 — as fears grow that the oil-driven inflation will force central banks to raise rates. Yahoo Finance
Stocks fell Friday, with the S&P 500 shedding 1.24% to end at 7,408. CNBC
The ISM manufacturing prices index reached 84.6 in April, its highest level since April 2022, reflecting tariff and energy cost pressures. Meanwhile, the IEA is projecting a Q2 2026 global oil demand contraction of roughly 1.5 million barrels per day — the sharpest decline since COVID — as demand destruction begins in Asia. Crestwood Advisors
The bottom line
The oil shock is transmitting into the economy — through inflation, through bond yields, and now increasingly through stock prices. But it works with a 3-6 month lag: first oil rises, then consumer prices rise, then margins compress, then earnings disappoint, then stocks reprice. We are somewhere in the middle of that sequence right now. Some analysts are warning that markets are "sleepwalking" into a recession by dismissing the energy shock as temporary — which is almost exactly the disconnect Niles was describing in the podcast. CNBC