Oil prices have taken center stage as tensions escalate in the Middle East, yet some analysts remain optimistic about stock performance this month. Tom Lee, a prominent strategist at Fundstrat, expressed his belief that despite the potential for a prolonged conflict, the stock market is likely to see positive movement through March.
The S&P 500 index has experienced a decline of over 1% since the onset of the US-Israel war with Iran on February 28. Historically, Lee noted, stock markets have often rebounded after the commencement of military conflicts. He referenced the adage, “sell the build-up, buy the war,” which has typically held true during past wars.
One of the main consequences of the ongoing tensions is an increase in oil prices. Lee pointed out that the United States may actually benefit from these rising costs. “Higher oil prices are the major impact of this conflict,” he stated, emphasizing that the US has been a net oil exporter since 2020. As such, increased crude prices could bolster the domestic economy, contrasting sharply with nations such as China and those in Europe and Asia, who are likely to face more significant economic repercussions due to disruptions in oil transportation, particularly through the Strait of Hormuz.
In recent trading, both Brent crude and West Texas Intermediate (WTI) crude saw price increases, even amidst announcements from the Group of Seven nations about releasing a combined 400 million barrels from strategic reserves. This release indicates an effort to stabilize the market, yet rising oil prices still pose challenges for global growth.
Lee anticipates that the uptick in energy costs will drive investors toward growth-oriented stocks, with the S&P 500 largely viewed as a growth index. However, he also issued a cautionary note regarding the overall market landscape for 2026. His forecast suggests a potential rally followed by a downturn, before culminating in a strong finish for the year.
