Oil surges above the dreaded $100 level as Iran-war market disruption deepens
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- The price of crude oil spiked above $100 per barrel for the first time in more than three years.
- The Iran war continues to affect crude supply from the region and cripple global oil flows.
- Wall Street strategists have warned a prolonged breach of $100 could damage the economy and stocks.
Oil hitting $100 per barrel was increasingly being bandied about as a possibility after the Iran war started. But it wasn't supposed to happen this quickly.
Brent crude spiked as much as 19% to $110.70 per barrel when oil trading commenced on Sunday evening. WTI crude rose 19% to $111.24 at intraday highs.
Since the start of the Iran war, the $100-per-barrel level has been viewed as a psychologically significant threshold that, when crossed, would spell inflationary trouble for the economy and the stock market.
Given that gas prices at the pump just rose to the highest level of Trump's second term, and that stocks are coming off their roughest week in months, both pieces of that equation appear to be moving into place.
The narrative is the same one that sent crude prices nearly 30% higher last week: as long as the Iran war rages on — and as long as countries in the Middle East continue to cut production — prices will move higher.
The focal point has been the Strait of Hormuz, which handles a fifth of the world's oil flow. Yet, as regional disruption has persisted, the scope of concerns has expanded to the entire global oil logistics network.
José Torres, a senior economist at Interactive Brokers, told BI last week that $100 would mark a true price shock for oil, leading to persistently high inflation and a possible down year for stocks. (The equity market already started feeling that pressure last week.)
Morgan Stanley CIO Mike Wilson — one of the most bullish stock strategists on Wall Street — has also been eyeing $100 as the level where he'd lower his base-case scenario for stocks this year.
If oil keeps rising, market pros have said to expect more trouble.
"$120 for Brent, you're at zero growth. That's the trigger for a recession," Bruce Richards, the CEO of Marathon Asset Management, said last week. "That's what I believe. And I believe that's what the markets believe, although no one said it yet."