Why are stock markets rising when oil prices are stifling growth?
We continue to see back-and-forth stock markets where, despite soaring oil prices and a latent risk of recession, gains following announcements considered positive tend to be stronger than losses caused by negative news.
Two months into the crisis, the price of Brent crude has practically doubled. However, judging by the levels reached by the main indices after the April rally (which hit new highs), it seems many investors have remained calm , and some have even bought more during the dips, as evidenced by the month’s gains: US stock markets rose between 10% and 15% depending on the index, Europe gained an average of 6%, and Japan rose 10%, thus recovering all the losses incurred during the worst moments of the energy crisis.
The much-discussed «FOMO» or «fear of missing out» did the rest, as investors fear regretting not having invested if the markets suddenly rise with unusual force (as has happened in several sessions this year) and, consequently, the indices recover quickly.
Business results are keeping pace
Nearly 60% of S&P 500 companies have already published their first quarter 2026 results with metrics that continue to show great strength.
It has been primarily US corporate earnings related to Artificial Intelligence (AI) and the massive investment plans of major technology companies that have fueled investor optimism. In fact, for now, the technology and consumer sectors are leading the gains thanks to demand for AI (with productivity improvements already evident) and resilient consumer spending (boosted by a favorable «wealth effect»), while defensive and commodity-related sectors have lagged behind.
In Europe , the banking sector is showing strong performance , especially in Spain with Santander, BBVA and CaixaBank leading the way , in an environment of interest rates that could remain high for longer than expected and with a very low level of non-performing loans.
In short, stock markets are supported by the results , but threatened by rising oil prices and their inflationary effects.
The patience of central banks is also helping, although this could change.
The European Central Bank (ECB) kept its deposit rate at 2.00% at last week’s meeting, and the Federal Reserve (Fed) did the same with its official interest rate range between 3.50% and 3.75%.
However, the high price of crude oil (plus freight and refining costs) suggests that high inflation will persist for a longer period, leading Euribor futures to point to an interest rate hike by the ECB this year. I don’t believe this will happen, as President Lagarde will be very careful not to push the Eurozone into a recession. Only if prices for all types of goods and services were to skyrocket due to the cascading effect of rising oil prices would there be upward revisions to official interest rates in the Eurozone.
Federal funds futures in the US, meanwhile, suggest that the Fed will keep rates unchanged in 2026. The strength of the US economy and its energy independence justify this.
However, the scenario outlined here could change and be reversed (ECB interest rates remaining unchanged while US rates rise) if some European macroeconomic data remain weak and more resilient growth persists in the US. Indeed, as I mentioned earlier, the US enjoys energy independence that we in our (energy-dependent) Russo-Europe could only dream of. This latter scenario is the one I consider most likely.
Changing realities lie before us, and despite the prevailing optimism, these changes could also occur in the markets. We shall see.