Oil has been on a roller coaster this year, and the ride just took another sharp turn up.
Brent crude settled at $109.86 a barrel on Friday after briefly touching $110, up 3.7% highest since May 19. The numbers only tell half the story, though.
Oil has shaken two sectors at once. Reportdly, in the same session tech stocks lost more than a trillion dollars in value.
Think about the journey. When the West Asia war began in late February, Brent was trading near $70. By late April it had topped $120, then sank below $80 for much of June and July under a shaky ceasefire. Now it’s back near $110. Crude is up more than 70% this year.
So why the jump? Traders are juggling several worries at once. Shipping attacks near Hormuz, Houthi strikes on Saudi Arabia and a collapsed Russia-Ukraine energy truce are all in the mix. Hormuz carries nearly 20% of the world’s oil shipments, so any threat there is felt everywhere.
For ordinary households, the worry is simple. Analysts say triple-digit crude will push up global inflation and retail fuel costs. Higher diesel prices tend to travel quickly, from trucks to markets to the weekly grocery bill.
Is there any relief ahead? One report expects Brent to ease to $90 by December, but that depends on the risks in West Asia calming down. For now, the market is watching the headlines, and so are drivers.
Oil producers’ costs stay mostly fixed, so higher crude prices go mostly to profit. Growth stocks move in the opposite direction. Costlier fuel pushes up inflation, making it more likely the Federal Reserve will raise rates again this year. Growth stocks are priced on those future profits. Higher rates make profits expected years from now worth less in today’s dollars.