Could oil collapse cause next credit crisis?

Crude oil under pressure
Crude oil under pressure

It's not just the Saudis who could get much poorer from the oil price free fall.

Everyone could suffer if the collapse triggers a wave of defaults through the high-yield debt market, and in turn, hits stocks. The first to fall: the banks that were last hit by the housing crisis.

Why could that happen?

Well, energy companies make up anywhere from 15 to 20 percent of all U.S. junk debt, according to various sources.

In fact, they've been the most prolific issuers of high-yield debt over the years, as their share of that market was just 5 percent in 2005. The oil bull market we once knew filled their coffers and made executives feel confident they could borrow more and more money.

Much of that high-yield debt is now on the books of banks, asset managers and pension funds.

What's more, banks are even more dependent on a happy junk market as they make a market in the bonds. Any collapse in prices could cause bidders to run and liquidity to dry up.

They also issue high-yield debt exchange-traded funds, which have been wildly popular with investors over the last decade. If that popularity turns into heavy selling, the banks may not be able to sell the bonds fast enough to meet the pricing demands of the ETF, traders said.

"I've no doubt the (high-yield) sector will get bad, but the worry is that because of the general lack of liquidity in high yield overall that it could be an environment that makes contagion very much a possibility," said James Farro of Coghlan Capital.

There are cracks, but certainly no contagion yet.

From its high above $100 this June, WTI crude is down more than 36 percent and counting.

The Credit Suisse High Yield Bond Fund, one of the many proxies for junk debt, is off 6 percent over that period.

Yet stocks in the bank sector are up more than 8 percent since June. And the Dow Jones industrial average is more than 6 percent higher.

"This is the one thing I've seen over and over again," said Larry McDonald, head of U.S strategy at Newedge USA's macro group. "When high yield underperforms equity, a major credit event occurs. It's the canary in the coal mine."

Since the turn of the last century, there have been 12 times when the value of high-yield debt dropped at least 10 percent in 60 days, according to Kensho, a quantitative analytics tool used by hedge funds. (The Credit Suisse High Yield Bond Fund was the benchmark.)

Sixty days after those credit events, shares of Citigroup had a median return of negative 8 percent. Bank of America's stock had a median return of negative 6 percent. JP Morgan took a 5 percent hit.

This may not seem that bad, but those are just "median" returns, and including times when high yield falls just 10 percent. The decline in these stocks and prices of high-yield bonds can get much worse.

Read MoreBiggest losers on lower oil

During the last high-yield collapse, which centered around debt tied to the housing sector, Citigroup lost 63 percent of its value in the following 60 days, Kensho shows. Bank of America was cut in half.

Still, some market analysts don't subscribe to a doomsday scenario like last seen during the housing crisis. They reason that this contagion can be contained as defaults in the energy sector won't reach epidemic levels.

But people like Farro are convinced it won't be that contained.

"If the high-yield market—in its fragile state—is given a push, we could see a real rout in the markets," wrote Farro from his blog on

Disclosure: CNBC's parent NBCUniversal is a minority investor in Kensho.