India, Sept. 28 -- The S&P 500 could face another major downturn if rising oil prices push inflation higher and force the US Federal Reserve to keep raising interest rates. The index last entered bear-market territory in 2022 and 2023, when high inflation led the Fed to aggressively increase interest rates.

Rising oil prices are again creating inflation pressure. Higher energy costs can make many goods and services more expensive, making it harder for inflation to cool. The inflation pressure has already contributed to the Fed carrying out a rate hike at its September meeting, according to The Motley Fool.

The S&P 500 is also trading at a very high valuation. Its Shiller CAPE ratio is currently 41.2, making it the second-highest valuati...