- Crude oil prices have soared since the beginning of the Iran war, with WTI and Brent crude futures surging nearly 35%.
- Siegel noted that the equity markets are “obsessing” over the wrong thing, pointing to the Federal Open Market Committee’s rate decision.
- He added that the Fed was not hawkish, while stating that the central bank still sees one cut in 2026 and another in 2027.
Jeremy Siegel, professor emeritus of finance at the University of Pennsylvania’s Wharton School of Business, warned on Tuesday that an oil price shock from the Iran war could trigger a correction in U.S. equities.
“An oil shock can absolutely produce a correction, and it will hit cyclicals and disposable-income-sensitive groups first,” he said, pointing to the stocks that could be hit by the correction ahead of others.
Since the beginning of the Iran war on Feb. 28, 2026, the Dow Jones Industrial Average (DJIA) has declined nearly 6%, while the S&P 500 and the Nasdaq Composite are down about 4% and 3%, respectively.
This is after an upswing in U.S. equities on Monday after President Donald Trump postponed strikes on Iran’s energy infrastructure for five days, resulting in a 631-point jump in the Dow, while the S&P 500 and Nasdaq closed 1% higher. Siegel cautioned that the situation remains fluid and that it is subject to sharp swings.
Crude Oil Prices Soar Since The Start Of Iran War
Crude oil prices have soared since the beginning of the Iran war, with WTI and Brent crude futures surging nearly 35%.
On Tuesday, U.S. West Texas Intermediate (WTI) crude futures maturing in May were up nearly 3%, hovering around $91 a barrel. Brent crude futures expiring in May rose more than 2% to hover around $98 a barrel.
The United States Oil Fund ETF (USO) gained nearly 2%, while the ProShares Ultra Bloomberg Crude Oil ETF (UCO) was up more than 4% at the time of writing.
Markets Obsessing Over The Wrong Thing, Says Siegel
The economist noted that the equity markets are “obsessing” over the wrong thing, pointing to the Federal Open Market Committee’s (FOMC) rate decision. He added that the Fed was not hawkish, while stating that the central bank still sees one cut in 2026 and another in 2027.
“At the same time, the Fed raised its 2026 real GDP forecast to 2.4% from 2.3%, lifted 2027 to 2.3% from 2.0%, 2028 to 2.1% from 1.9%, and, most important, moved its longer-run growth estimate up to 2.0% from 1.8%. Markets sold off anyway because oil, not the dot plot, became the dominant variable,” he added.
Siegel stated that the long-term growth forecast is the real story, even as the markets fret over the tensions in the Middle East. “A 20-basis-point increase in the longer-run GDP estimate is the Fed acknowledging that productivity is improving, and I believe AI is a meaningful part of that story. That matters much more than most investors appreciate,” he said.
What Should Investors Do?
Siegel has a suggestion for investors who are worried about the tensions in Iran and the accompanying rise in crude oil prices. The economist said that a correction is not a collapse, and that an easing Middle East risk premium could bring the S&P 500 back to 7,000 before the end of the year.
“I would not chase the energy spike. I would continue to favor high-quality equities over long-duration bonds and use volatility to add to productivity beneficiaries, select technology, and dividend growers,” he added.
Siegel noted that while he is not dismissing the risks, he is optimistic because growth, earnings, and AI-driven efficiency are more durable forces than a temporary shock in energy markets.
Meanwhile, U.S. equities declined in Tuesday’s pre-market trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down 0.1%; the Invesco QQQ Trust ETF (QQQ) fell 0.05%; and the SPDR Dow Jones Industrial Average ETF Trust (DIA) declined 0.17%. Retail sentiment on Stocktwits regarding the S&P 500 ETF was in the ‘extremely bearish’ territory.
Also See: Why Is OTLK Stock Falling Today?
For updates and corrections, email newsroom[at]stocktwits[dot]com.