S&P 500 holds despite Oil shock – Watch these cracks

Oil spiked close to $120 per barrel as tensions escalated around Iran and the Strait of Hormuz. Under normal conditions, a move like that would shake equity markets quickly.

But the S&P 500 is still sitting near 6,775.

That is the interesting part of this story. The market has absorbed the oil shock far better than expected.

Energy stocks are surging. Financials are weakening. Technology is wobbling but not breaking. So the index looks calm. But the behaviour underneath is getting messy.

That is why it helps to step back and look at the key structures across the market.

The S&P 500 is still holding its trend

The S&P 500 chart uses a 100 EMA with a 1 standard deviation band.

When price pushes outside the band, it usually means the market is trending strongly. When the market pulls back, price often returns to the EMA or the opposite band before the trend continues.

Right now the index is sitting close to that lower trend structure. So far, the oil shock has not broken the broader S&P 500 market trend. That is one reason the index still appears stable.

However, there are early signs the trend may be weakening, although the signal is not yet decisive.

The 100 EMA has been broken, but the broader trend band is still holding. For now, price is testing the 100 EMA at $6,795.90 as resistance. Additionally, this coincides with a short-term range with previous lows clustered between $6,775.79 and $6,794.60.

For now, traders should watch for the following technical signals:

• If the S&P 500 closes below $6,775.79, the probability of a deeper pullback increases.
• In that case’ traders may look toward 1SD support near $6,700, with a deeper support zone around $6,500.
• If the index reclaims $6,794.60, the broader uptrend narrative remains intact and the recent breakdown may prove temporary.

Semiconductors are quietly holding

If you want to know whether the tech trade is actually breaking, semiconductors are the place to look. The SMH semiconductor ETF tracks many of the companies that power AI infrastructure and global computing demand.

During the initial oil spike, semiconductors pulled back like the rest of the market, but they did not collapse despite the panic rotation into energy and constant macro headlines. In fact, SMH appears to be held up by the daily 100 EMA, as it was in Nov 2025.

As long as semiconductors hold, the technology sector still has stability and potential for growth, if supported by strong earnings.

Financials are showing the first weakness

Financial stocks are reacting differently. Banks and financial companies are more sensitive to economic expectations and interest rate outlook. When oil prices spike, inflation risk increases. That complicates the path for central banks trying to cut rates.

This pressure is starting to appear in financial stocks. So while the index is holding, some sectors are already showing stress, and the financial sector is a critical one as every business borrows from banks.

As one could observe, the XLK ETF is no longer supported by the daily 50 EMA (1sd) and is in fact rejecting off the 50 EMA now in 2026. This change in behavior is significant and brings about the case for a rejection at $52.48 (50 EMA), even if the index recovers.

What usually happens after an Oil spike

Instead of focusing only on the oil chart, it helps to look at how markets have historically behaved after large oil shocks. The data below comes from Schaeffer’s Research, which analysed 15 instances (No. of Returns) where oil surged more than 10% in a single week.

The results show that oil spikes are often front-loaded reactions to geopolitical or supply shocks.

Historically, oil falls by about -3.7% on average a week after the spike, and only 40% of cases continue higher. That suggests the initial move is often driven by panic positioning rather than sustained demand.

Over longer horizons the picture changes. Three months after a spike, oil shows an average gain of roughly 8.3%, and by 12 months the average rise exceeds 22%. When supply disruptions persist, the rally can resume once the initial volatility fades.

Equities have historically shown resilience during this phase.

The S&P 500 averages a 0.66% gain one week after an oil spike, with roughly two thirds of cases positive. Markets often absorb the shock in the short term before the macro impact becomes clearer.

That context helps explain the current reaction. Oil has surged sharply, yet the S&P 500 remains relatively stable. Historically, this type of short term resilience is not unusual.

The key question is what happens next. What matters next is whether the supply disruption persists.

Global sentiment is also being tested

Another place traders watch during uncertain periods is Asia. The Hang Seng Index often reacts strongly to shifts in global risk sentiment and Chinese policy expectations.

The weekly chart shows the index continuing to respect its long-term moving average structure. Seasonal patterns around the Lunar New Year can also influence positioning. For CFD traders looking to diversify trades outside of US markets, this could be one to watch.

Stability on the surface

Right now the market is doing something interesting. Oil shocked higher and energy stocks surged, that is all bearish in terms of causing more inflation. As a knockon effect, it puts pressure on the already weakening Financial Sector.

Yet, the S&P 500 is still holding. And that’s something to behold – as the index had every reason to collapse.

Semiconductors holding strong is one part of why the index has not broken down yet. But, geopolitical tensions and energy volatility is increasing the risk sensitivity of markets.

So now, what remains is to:

• Watch the price action — What breaks first, the downtrend or uptrend on S&P 500?
• Geopolitical tensions — Is the Strait of Hormuz shutdown likely to continue, likely due to prolonged conflicts?

At the moment, the S&P 500 is holding together. But with oil volatility rising and sector leadership shifting, the cracks underneath the surface are becoming harder to ignore.