The S&P 500 faces the risk of a 20% drop if higher oil prices lead to a surge in inflation, RBC Capital Markets strategists said in a report laying out three possible correction scenarios. Strategists including Lori Calvasina said U.S. stocks are vulnerable given the recent sharp rebound and valuations that appear stretched. They said the larger and longer the conflict in the Middle East, the greater the negative impact on U.S. stocks. In the worst-case scenario, if the attacks push up energy prices, the S&P 500 is expected to return to its April low. In a better scenario, the index could fall about 13%, they said. "The conflict could raise more concerns about the state of the consumer, the broader economy, and the path of the Fed, and this narrative shift seems likely to pose a problem for stock prices," the strategists wrote in the report.