Wall Street's traditional playbook of buying stock-market dips during geopolitical flareups faces a critical test as Iran conflict threatens to push oil toward $100 a barrel. While strategists typically view such dips as buying opportunities, the potential for prolonged energy price surges has investors reconsidering. West Texas Intermediate crude jumped 12% to $75.33 before paring gains, while Brent crude rose 7.4% to $77.85.

A sustained oil price surge would threaten consumer spending and potentially reignite inflation, forcing interest rates higher. Jay Woods of Freedom Capital Markets warned that higher energy costs would act as an "enormous and unexpected tax on the consumer" while the Federal Reserve faces pressure to lower rates. The S&P 500 initially slid 1.2% following the assault on Iran but recovered to trade little changed by midday.

Oil prices above $100 have historically troubled stocks, with the S&P 500 falling an average 1.6% in the year following such periods since 1983. Morgan Stanley strategists led by Michael Wilson identified $100-a-barrel crude as a potential bear case for stocks, though they note the economy is currently in an early-cycle environment. The outcome largely depends on whether the Strait of Hormuz remains closed, with one-fifth of global oil consumption passing through this critical chokepoint.