Here’s How Far Oil Prices Have To Rise To Hurt The S&P 500, According To History
On Monday, risk assets reacted poorly to the dramatic events that unfolded over the weekend in Saudi Arabia, where drone attacks on the country's oil infrastructure took half of the kingdom's production capacity offline.
Brent spiked ~$12 out of the gate to start the new week, the biggest intraday jump on record.
The US and the Saudis blamed Tehran, and the prospect of retaliatory strikes spooked investors at a time when geopolitical risk continues to dominate headlines, even on days when that
I think it’s more than just ‘elevated geopolitical risk’. If Mr. Bone Saw is willing to chop up a US resident in an embassy of a NATO country while his fiance stands outside because he was saying mean things than there is zero percent chance that he is not going to be striking back at Iran in a big way for blowing up his Aramco IPO. Just a matter of when.
I think your analyst is making an error….. he is doing 1st level thinking here. A 12% rise in oil prices is a significant hit to developing asia outside of perhaps indonesia and vietnam. China and Japan really take a whack as well. The second and third order effects here are probably significant if oil risk premiums persist. The geopolitical ramifications are serious. I don’t see how Kolanovic would conclude that this leads to a higher likelihood of a trade deal with China either. It might, but I don’t see what basis he would have for coming to that conclusion. It could just as easily force both leaders to play to their nationalistic hardline political bases.
The domestic US relationship with oil prices has changed greatly in the past decade. As the largest producer and largest exporter, the US now benefits from high oil prices as much as it suffers.
Beneficiaries of high prices are TX, OK, E&P, HY issuers and holders, etc. Sufferers are drivers, transport, and a broad but diffuse impact on “the consumer”.
I think that as a practical matter, oil prices are no longer a major driving factor for the US economy overall unless the price gets extreme. $30 is extreme, $130 too. But a move from $50 to $80 and back to $50, while interesting for energy stocks, isn’t a big deal overall.
Ria’s point, that rising oil prices still have clearly negative impacts on other countries, bears watching.
It has been a long time since you could watch falling (rising) oil prices and expect tradable positive (negative) impacts on, say, retail stocks.