What smart people are saying about oil's latest spike to nearly $120 a barrel

"Events overnight increasingly suggest the White House has lost control of this war, and the TACO trade off-ramp, upon which the disconnect between oil prices and the equity market is based, looks increasingly like an enormous lobster pot; easier to get into than out of," McKeown said in a LinkedIn post.

"If oil prices persist at this level or higher, is this inflationary or deflationary? The answer is both, but not simultaneously. However, they lead to the same endpoint: what those of us of a certain age remember as the stagflationary 70s. And as we learnt then and more recently in 2022, central banks can't print energy."

"Europeans didn't start this war but they are certainly living with the consequences," Beauchamp said in a morning note.

"European markets have been hit hard as WTI and Brent prices diverge sharply, reflecting Europe's dependence on energy imports. It wouldn't take much for global equities to tip from 'worried' to 'panic', and in that case the US' relative outperformance and its comparative energy security will count for little."

"As I write this the price of Brent crude is above $116 a barrel, up from about $70 before the bombing began," Krugman wrote on Substack.

"If the blockade of the Strait of Hormuz goes on for months rather than weeks this will be a shock to world oil supplies substantially worse than the shocks of 1973 or 1979. And while I'm not a strategic expert, I don't see how that strait reopens anytime soon.

"There's an uncomfortable parallel here with 1973, the year stagflation is generally considered to have started. I'm not sure how many people are aware that one reason the 1973 oil shock hit so hard was that inflation was already rising fast even before the Yom Kippur War led to the Arab oil embargo, which triggered the first oil crisis."

"Europe in particular is reliant on LNG exports from Qatar, as countries have been weaning themselves off dependence on Russia. The conflict is not only highly damaging for economies in the region, with tourism and business activity hit, but the knock-on effects of higher energy prices will have toxic repercussions worldwide," Streeter wrote.

"Food prices, which had been easing, risk rising again as freight costs increase and fertiliser exports from the Middle East are disrupted. There are also concerns about helium supplies being stranded, a key component in semiconductor manufacturing, which could lead to delays in producing electronic goods and even cars.

"The spectre of stagflation is hovering, with the combination of rising prices and stagnating growth posing a real threat. High energy costs are set to dampen consumer spending and curb business investment as both grapple with elevated bills and ongoing uncertainty."

In his newsletter, Boockvar wrote: "With the fertilizer disruptions and jump in prices, mostly nitrogen, corn prices have broken out to the highest since last June at $4.68 a bushel for the May contract with the planting season now upon us. Wheat is 3 cents from the highest since June while soybeans continue to trade around $11.50-$12.

"I want to emphasize, the farmer needs much higher crop prices from here to offset costs rising aggressively for diesel and fertilizer. That won't be good for consumers of course but a trade off that will have to be balanced."

"What began as isolated strikes has now broadened into a regional crisis reshaping oil and gas markets, shipping routes, and global risk sentiment," Casali wrote.

"For now, volatility is likely to persist until traffic through the Strait of Hormuz resumes and the attacks on Middle East oil infrastructure stop. However, if the US and China reach an agreement then it could facilitate de-escalation in the Middle East, lowering energy prices and easing geopolitical concerns. Global equities could stage a relief rally under this outcome.

"Nevertheless, if the US instead escalates (especially with ground forces), investors should brace for a sharp correction, a renewed oil spike, and potentially a global recession."