It's not a coincidence that the stock market topped out on April 23, one day after Deepwater Horizon oil rig sank. As the news from the Gulf has gotten worse and worse, stocks have had their sharpest correction since the bottom in March 2009.

And on days like Thursday when the news from the Gulf is a little better, there's always a big rally. There's definitely a connection in both directions. This is market-moving stuff.

There's legitimate concern that the spill will have a tangible negative impact on the whole economy, setting back a recovery that wasn't all that great to begin with. No one knows what losses will be borne in the fishing and tourism industries in the Gulf states, and over how many years. Beyond that, with so much of America's fish coming from the affected region, there could be a major impact on food prices.

But in my view the worst consequences are in perceptions and sentiment. Let's face it: The oil spill is not just a catastrophe, it's downright terrifying. It's not hard to let your imagination run away with you, and start visualizing an endless stream of oil destroying the world's oceans -- it's like one of those big special effects movies about the end of the world.

Even short of that kind of planetary cataclysm, it makes you think that a lot of the things we take for granted in the modern world might suddenly be taken away from us. So much that we do depends on taking technology to its very limits. If we have to stop drilling for oil because we just can't manage the risks, maybe we have to stop building faster cars, taller buildings, bigger airplanes.

It taps into deep human myths. I'm reminded of the scene in J.R.R. Tolkein's "The Lord of the Rings" when our heroes pass through the ruins of Moria, the once-great underground empire of the dwarves. We learn that "they dug too greedily and too deep," and released the demonic creature called the Balrog. If you've seen the movies of Tolkien's fantasy classic, you'll remember the Balrog from the big cliffhanger at the end of the first of the trilogy -- that's the monster who kills the great wizard Gandalf.

Have we drilled too greedily and too deep in the gulf? Have we released the Balrog?

There are other myths like this. Have we flown too close to the sun, like Icarus? Must we, like Prometheus, be punished for bringing the gift of fire to mankind? Must we be expelled from paradise for tasting of the fruit of the Tree of Knowledge?

Hey, I don't mean to get all grandiose on you. But this is scary stuff, even if you limit your imagination to horrific pictures of pelicans covered in oil. Who wants to buy stocks when that kind of thing is going on in the world?

There are other consequences of the way we emotionally react to the horrors of the spill. If we decide that it's just too risky to keep drilling for oil in the oceans, then we'll have less oil. Oil will get more expensive. I don't believe there's any ambiguity about the economic effects of that. They're not good. In my view it's nothing short of an inexplicable miracle that the oil price has fallen, rather than risen, in this episode. Frankly, I'm at a loss to explain it.

There are political consequences, too. The oil spill is making the Obama administration look even worse than the Bush administration looked in the wake of Hurricane Katrina, and that's quite an accomplishment. As a result, Obama is getting increasingly strident in his recriminations of the companies involved, and increasingly personal in his attacks on their executives. That unfortunately only exacerbates the anti-business tone that was already pretty strident to begin with.

What does it tell you when Obama tells a television interviewer that he's trying to figure out "whose ass to kick" for the spill? As I type these words, I wonder whether SmartMoney.com will even print them without some kind of polite elision. And yet these words were spoken in public by the president of the United States. Are we back to the world of Richard Nixon and "expletive deleted"?

So who knows what kind of nutty policy response will come from a president who's that out of control of the situation, and of himself? Maybe he'll shut down the whole U.S. oil industry just to look like he's "doing something."

Don't kid yourself that something like that can't happen. After the malfunction of the Three Mile Island nuclear power plant decades ago, the nuclear power industry in this country never built another plant. Not a single one. The rest of the world has built hundreds of them, and they've done just fine.

But not us. We got so scared after Three Mile Island that we made our power industry entirely dependent on fossil fuels. Maybe if we hadn't done that, we wouldn't have had to drill so deep in the Gulf. You see, there are always unintended consequences. You turn away from one risk, and take another without even realizing you're taking it.

For the companies involved in the spill, there are obviously going to be big consequences. They'll have to pay to stop it (if they can stop it), and to clean it up (if they can clean it up). People whose property and livelihoods were disrupted will have to be compensated. That's only fair.

But what if the economic consequences for these companies goes beyond that? The Obama administration has already threatened criminal charges. Paying damages is one thing, but these companies could be forced out of business entirely by a quest for vengeance. Is that really what the economy needs right now? I don't think so.

I think investors should take this very, very seriously. There a lot of wild cards in this deck, and most of them are bad.

But there's an upside here, too. Let's say that they figure out a way to stop the spill soon. If it comes before there is irreversible damage -- environmentally or politically -- that could be a huge catalyst for stocks. At a stroke, it would completely eliminate all the risks and uncertainties I've outlined here. The correction we've had since late April could be entirely reversed in a matter of days.

Keep your eyes on it. If this gets worse, it will happen slowly. But if it gets better, it could be very sudden. I know the "top kill" operation to stop the leak didn't work a couple weeks ago. But maybe the next attempted solution will.

Then we won't be talking about a "top kill," we'll be talking about a bottom in stocks -- and making a killing.