Heres where the smart money believes oil prices could wreak havoc on the stock market

The markets continue to soar despite the Iran war and a host of other worries, but the smart money has quietly settled on a gauge for figuring when things could go south – and all eyes are on the price of oil, On The Money has learned.Specifically, the warning level I’m hearing from CEOs, hedge fund types and high net-worth brokers is close to $120 a barrel.If you believe the sentiment, that’s pretty good news given that even with the conflict in the Persian Gulf heating up, oil is still hovering around $80 a barrel.Does that mean you should start buying stocks? Well, a few words of caution.

First, oil prices can change quickly, and the Iran situation is volatile.There’s also a minority view, I have discovered, that holds any conflict disrupting the supply of oil – even if it’s the Iranian stuff mostly bought by the Chinese, is bad for the global economy.To be sure, the people I speak to are pretty sanguine that the worst-case-scenario isn’t in the cards.

Here’s that calculus from one financial services CEO: Corporate earnings, and particularly those in the financial sector (which happens to be the plumbing of the economy and markets) are doing great.See the latest earnings of JPM, Goldman Sachs and the rest.AI spending is still plentiful and producing productivity gains.

That’s a “great background for strong long-term markets,” my CEO source says.His caveat is that higher oil prices can “can moderate financial performance” by increasing inflation and squeezing profit margins.

But that, he adds, is only if oil stays above $120 for months, and even then it will only have a “short-term impact on the markets.”Why not long term? Well, corporate America is pretty good at improvising and we produce a lot of oil here, so this can’t turn out to be another 1970s shortage situation.And what makes $120 a barrel such a magical number? You will recall that when the Iran bombing began in March, oil prices went there and the markets cratered sig...