Investors have a tricky balancing act on their hands during the Iran war, Jim Cramer said Monday, recognizing both the real risks that surging oil prices pose to stocks and the difficulties of timing the market. After a weekend of escalation in the Middle East, Jim said the current conditions in the oil market — including the Strait of Hormuz shipping lane at an effective standstill and a steady attack on the energy infrastructure — are very troublesome for the economy and, by extension, the stock market. Global oil benchmark Brent crude traded around $100 per barrel in late Monday morning trading, up nearly 7%. Reports that the Group of Seven nations is considering dipping into its strategic crude reserves moved Brent off its overnight high above $119. West Texas Intermediate crude, the American standard, also topped $119 overnight, before trimming gains on the G7 chatter and dipping below $97. Jim, however, said he wasn’t ready to rule out a worsening of conditions that sends oil back to those levels and potentially even higher into the realm of $150 a barrel. In mid-February, Brent was in the upper $60s. Prices at the pump in the U.S. have already moved up considerably. The average price of U.S. gasoline reached $3.48 a gallon on Monday, up 16% from a week ago, according to AAA. Anything that dampens expectations of future corporate profits is problematic for the stock market. With the surge in oil, businesses are not only confronting higher input costs that could eat into their margins unless they raise prices. But consumers will also have less money to spend elsewhere in the economy if more of their budgets go toward filling up their tanks. “This is going to cut into consumer spend. It always does,” Jim said on CNBC. That’s why big moves higher in oil prices are typically accompanied by significant drawdowns in the stock market, he explained. The most recent example is in 2022, when Russia’s invasion of Ukraine in late February sent oil prices into triple-digit territory and contributed to inflation reaching four-decade highs in the U.S. That year, the S & P 500 fell more than 20% from its highs in January before bottoming in October — something Cramer revisited in a Sunday column for Investing Club subscribers. @CL.1 YTD mountain WTI crude YTD “You don’t have spikes in oil over 100% and have the S & P do nothing,” Jim said. WTI crude, which traded in the upper $50s in January, more than doubled, in the current situation, as of the overnight highs of $119. And yet, he said that investors shouldn’t be sprinting for the exits Monday — even knowing the economy, corporate earnings, and stock prices could all take a hit from the war-related surge in oil prices. “I want it to be temporary. I certainly don’t want people to … get out now” because it’s so hard to know when to get back in, Jim said. Another reason why he said investors need to stay in the game despite the oil spike: President Donald Trump and his history of paying close attention to the stock market as a barometer of his success. “This one could be different because we have a fickle president,” Jim said. “Do you really want to sell a lot and then the president says, ‘Mission accomplished. We’re good.'” “Next thing you know, you’re like, ‘I sold everything and the president decided, you know what, we won,'” Jim continued. “That’s the problem for the bears. That’s the problem, because the president has usually sided with the bulls.”
