By every historical measure, stocks should be tanking right now. Oil prices have surged more than 50% since the US-Iran war essentially closed the Strait of Hormuz, with Brent crude rising 7.2% to $102 a barrel on Monday (1).
Energy shocks of this magnitude have historically dragged equities down sharply. Still, even on Monday, the S&P 500 closed at 6,886.24 (2) – its highest level since before the start of the war, recouping all war-related losses.
of CNBC crazy money Host Jim Cramer (3) tackled this disconnect head-on, and his explanation comes down to interest rates — which many investors aren’t paying enough attention to.
“I think I’ve been negligent in bringing in low-rate power, because that’s why the bulls continue to win when it looks like they should be killed,” Cramer said. “Let’s not get too carried away with it. If interest rates had gone up, this market would have been very different.”
The mechanics of Cramer’s argument are worth understanding as a matter of personal finance: when interest rates rise, investors demand a lower price for each dollar of future corporate profits. This is called price-to-earnings multiple compression.
The reverse is also true. Falling or stable rates justify investors paying more for stocks even amid geopolitical chaos.
“What does the Strait of Hormuz have to do with Bristol Myers’ price-to-earnings ratio?” Kramer asked (3). “The answer is nothing.”
The 10-year Treasury yield peaked on March 26 (4), and apparently, Cramer notes (3), came on March 30, just days after the S&P 500′ closed at its 2026 low. Once bond yields rolled over, stocks moved higher. The sequence is the market’s basic valuation mechanism at work.
Monday’s trade reinforced Kramer’s point. “Battened-up software stocks” including Salesforce and Microsoft (3) were the strongest performers, while energy stocks directly tied to the Iran war were the long-runners. Investors flocked to growth, not defense.
Cramer also pointed to the coming changes at the Federal Reserve as a potential tailwind. Jerome Powell’s term ends in May (5), and President Donald Trump’s successor is Kevin Warsh (6), a former Fed governor who market observers see as likely to hold short-term rates steady or cut them.
“Unless rates are high, the new Fed will certainly not raise short-term rates and they may bless us. [rate] cuts,” Cramer said.
He also argued that the Fed may be inclined to look past current inflationary pressures when it finally moves. Higher price readings linked to tariffs and energy costs can be treated as temporary rather than structural.
“The Fed will likely starve these hikes as all single prices rise,” Cramer predicted.
Read more: Here’s the median income of Americans by age in 2026. Are you falling behind or lagging behind?
There’s another reason Cramer believes this oil shock could hit differently than past energy crises: natural gas.
While oil prices are set globally and vulnerable to supply disruptions in the Middle East, the U.S. produces large amounts of natural gas domestically, and U.S. natural gas prices remain dramatically lower than international benchmarks (7) according to the U.S. Energy Information Administration.
American manufacturers and utilities are heavily dependent on this cheap domestic fuel source, which acts as a buffer against oil-driven inflation.
“Natural gas — not oil — is our secret weapon,” Cramer said.
Vehicle fuel efficiency has also improved significantly in recent years, meaning consumers burn less gasoline per mile than before the energy crisis, softening the economic punch of higher crude prices.
Cramer’s broader message for everyday investors is to resist the urge to panic-sell whenever a geopolitical headline hits the wire. The war in the Middle East is real and ongoing, but so is the market’s underlying valuation logic, which is anchored in interest rates, not missile strikes.
“History has been disobeyed and ignored,” Kramer said.
And the data backs him up: As Fortune (8) notes, nine of the S&P 500’s best 10 days since Trump’s second term began were thanks to either tariffs or signs of easing on Iran — rewarding investors who held rather than sold.
Not that geopolitical risk doesn’t matter. But it’s when rates cooperate that the market has a remarkable ability to see past the noise.
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BNN Bloomberg (1); CNBC (2), (3), (6); Market Financial Content (4); CNN (5); US Energy Information Administration (7); fate (8)
This article originally appeared on Moneywise.com under the headline: ‘History defied’: Jim Cramer says Iran war should kill stocks, but US has ‘secret weapon’
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