The US stock market reacts differently to changes in oil prices depending on the state of the economy. Demand-driven shocks have a stronger and longer-lasting impact on stock returns, especially during economic downturns. Expectation-driven precautionary demand in recessions plays a significant role in stock market variability. The study used a nonlinear approach to analyze how oil price shocks affect the US stock market, showing that the relationship is not always straightforward and can vary based on economic conditions.