So, the S&P 500 is down about 4% from its January high. Not great, but given we're in the middle of a war involving a major oil producer that kicked off in late February, it could be worse, right? The market seems to be taking it in stride, showing what you might call headline resilience.

But here's the thing about financial history: it loves a good template. And if the current situation in Iran decides to follow the playbook from past oil crises, investors might want to buckle up. The real story isn't what happens in the first few weeks of a shock. It's the slow, grinding damage that can unfold over the subsequent months. According to the data, we might just be in the early innings of this game.

The Not-So-Comforting History of Oil Shocks

Let's talk about those templates. Goldman Sachs' equity strategy team recently dusted off the history books, looking at four severe oil supply shocks from recent decades: the 1973 Arab oil embargo, the 1979 Iranian Revolution, the 1990 Iraqi invasion of Kuwait, and the 2022 Russo-Ukrainian war. They didn't just look at the immediate market wobble; they tracked the S&P 500's performance both during the oil price spike and across the entire peak-to-trough arc of each episode.

The picture that emerges isn't one of a quick V-shaped recovery. It's more of a long, drawn-out sigh.

"The S&P 500 declined by a median of 12% alongside rising oil prices during the oil price spikes in 1974, 1980, 1990, and 2022, and suffered a median peak-to-trough decline of 23% around those episodes," said Ben Snider, a Goldman Sachs equity analyst.

The median peak-to-trough decline was 23%. The average was a steeper 27%. Even the "mildest" episode—the Iranian Revolution—ultimately led to a 17% drawdown in stocks. Interestingly, the S&P 500 actually rose 6% during that initial oil price spike, thanks to a very accommodating Federal Reserve. But the market eventually paid for that accommodation in 1981 when the Fed had to slam on the brakes to crush inflation, sending stocks tumbling.

Now, look at the current line in that table. We're two months in. Oil is already up 68%. That's a supply shock magnitude already comparable to what we saw at the start of the Ukraine war, which ultimately delivered a 25% drawdown. Yet the S&P 500's peak-to-trough decline so far is just 4%.

This time also has a unique geographic twist. Iran controls the Strait of Hormuz. If you're not familiar, it's not just any waterway—it's the critical maritime chokepoint for more than 20% of the world's crude oil supply. Russia's war impacted flows, but it didn't hold the keys to a literal bottleneck of this scale.

So, Is This Time Different?

Goldman's official base case, for now, is not a bear market. They're sticking to their year-end S&P 500 target of 7,600, even though they've slightly lowered their price-to-earnings multiple assumption to 21x from 22x.

Their optimism rests on two main ideas. First, they believe AI-driven earnings growth will be a powerful force, accounting for roughly one-third of S&P 500 earnings per share growth this year. Second, they're betting the disruption at the Strait of Hormuz will be temporary, with oil flows gradually resuming over the coming weeks.

But any good strategist has a plan B (and C). Goldman also modeled two adverse scenarios that are worth keeping in your back pocket.

In a "moderate growth shock" scenario—where the market starts pricing in a significantly worse economic outlook—Goldman estimates the S&P 500 could fall to around 6,300. That's a decline of roughly 7% from current levels and would imply a P/E multiple of about 19x.

Then there's the severe scenario. In this view, a 60-day disruption to traffic through the Strait of Hormuz pushes oil to an average of $145 a barrel in March. In that world, Goldman sees potential downside for the S&P 500 to 5,400. That's a 20% decline from today's levels, bringing the valuation multiple down to 16x.

The takeaway? The market's calm so far might be justified if the Hormuz situation clears up quickly and AI profits roll in as expected. But history's template suggests oil shocks have a habit of writing longer, more painful chapters than the first few pages imply. Whether this script gets rewritten depends heavily on what happens next in a very narrow strip of water.