Ed Yardeni, president of Yardeni Research, said Monday he can’t rule out a bear market if investors begin pricing in a repeat of 1970s-style stagflation.

His warning landed as crude oil surged past $100 a barrel for the first time since 2022.

Brent crude spiked above $110 Monday morning as the U.S.-Iran war entered its tenth day with no ceasefire in sight.

Former U.S. Chairman of the Joint Chiefs of Staff Mike Mullen warned the escalating U.S. conflict with Iran could become a lengthy war, saying recent American military campaigns show that such conflicts rarely end quickly.

The Stagflation Case

The economy shed 92,000 jobs in February, the third monthly loss in five, while wages came in hot at 0.4% month-over-month. That combination of weak hiring and sticky wages is exactly what the Fed doesn’t want to see.

Yardeni said his base case remains a technology-led boom and bull market. But he acknowledged that if the oil shock persists, the Fed’s dual mandate would be “stuck between the increasing risk of higher inflation and rising unemployment.”

He still assigns a 60% probability to what he calls the “Roaring 2020s,” a scenario in which AI-driven productivity gains and resilient corporate earnings push the S&P 500 to 7,700 by year-end. But his new 35% meltdown scenario now explicitly includes a 1970s-style stagflation outcome.

What Polymarket Thinks

Polymarket’s “U.S. recession by end of 2026?” contract sits at 31%, up from 22% in February but still well short of a consensus call.

The odds of two rate cuts this year have fallen on Polymarket, with one and two both priced equally at 27%. The probability of zero rate cuts has increased to 18%, fueled by war-led inflation fears.

Oil above $100 limits the Fed’s room to ease.

Traders think a ceasefire this month is unlikely, assigning just a 22% probability to a resolution before March 31. Those odds rise to 47% by April 30, and 61% by the end of May.

Energy Sector Winning So Far

The Energy Select Sector SPDR ETF (NYSE:XLE) is up more than 26% year to date.

Energy stocks were the only sector n the S&P 500 to finish last week in positive territory. The broader S&P 500 has turned negative for 2026.

The divergence maps directly onto Yardeni’s scenario framework.

His 35% meltdown case is an energy bull case: prolonged conflict, sticky oil prices, and a Fed that can’t cut.

His 60% Roaring 2020s case is the opposite: a quick resolution that sends oil back down and lets the tech-led rally resume.

On Polymarket’s crude oil end-of-March contract, bettors give a 22% probability that oil hits $150 by month-end and an 8% chance it reaches $180.

If the higher end plays out, the energy trade has a lot further to run. If it doesn’t, Yardeni’s base case may still hold.

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