Markets and economies feel the ripple effects of rising oil prices.
Taking a closer look…
- Markets continued to react to minute-by-minute developments regarding the ongoing military strikes in Iran. In response to these military strikes, Iran has threatened attacks on oil tankers navigating the Strait of Hormuz. Roughly 20% of the world’s oil and natural gas pass through this narrow, strategic waterway.1
- Oil prices soared, reaching nearly $120 per barrel, but ended the week around $100.2 The sharp rise and subsequent pullback reflected a market struggling to absorb fast moving developments, from US promises of naval escorts to large strategic reserve releases from several key countries. Markets continue to question whether these strategies will be successful against the backdrop of an escalating military conflict.
- Higher oil prices lead to higher gasoline prices and that pressure extends beyond the pump. Rising fuel and transport costs could push up the price of food and a wide range of goods in the US, as the full impact of higher oil prices has yet to be realized.
- How does this all impact markets? Year to date, US stocks have declined, weighed down by recent geopolitical turmoil and surging oil prices. In contrast, international stocks remain positive, supported by improving fundamentals and a softer US dollar. Bonds have remained flat, but other diversifiers like commodities and real estate investment trusts (REITs) have been up, helping to temper widespread volatility.3
Institutional Portfolio Manager, Strategic Advisers
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