What the fresh march higher in oil means for world markets

StreetInsider04-17

By Lucy Raitano LONDON (Reuters) - Oil prices are up around 16% so far this year near $90 a barrel, with supply worries high given escalating Middle East tensions and tit-for-tat attacks on energy ...

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After all, it was an energy price surge two years ago that helped drive inflation and interest rates higher on a scale not seen in decades.The International Monetary Fund on Tuesday described an \"adverse scenario\" in which an escalation of conflict in the Middle East would lead to a 15% jump in oil prices and higher shipping costs that would hike global inflation by about 0.7 percentage points.The tightness in oil supplies, and higher prices, has been underpinned by oil producing group OPEC and other big oil producers curbing their output.Morgan Stanley has lifted its third quarter Brent crude oil forecast by $4 per barrel to $94. With oil prices expected to stay high, we look at the fallout for world markets.Barclays head of European equity st","collect":0,"end_time":0,"defaultTopTitle":"streetinsider.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"IE00BKVL7J92.USD":"Legg Mason ClearBridge - US Equity Sustainability Leaders A Acc USD","BK4127":"投资银行业与经纪业","LU0106831901.USD":"贝莱德世界金融基金A2","BK4534":"瑞士信贷持仓","LU1668664300.SGD":"Blackrock World Financials A2 SGD-H","BK4585":"ETF&股票定投概念","LU0320765646.SGD":"FTIF - Franklin Income A MDIS SGD-H1","BK4581":"高盛持仓","LU0098860793.USD":"FRANKLIN INCOME \"A\" INC","LU1989772840.SGD":"CPR Invest - Climate Action A2 Acc SGD-H","BK4504":"桥水持仓","BK4588":"碎股","LU1989772923.USD":"CPR Invest - Climate Action A2 Acc USD-H","IE00BZ1G4Q59.USD":"LEGG MASON CLEARBRIDGE US EQUITY SUSTAINABILITY LEADER \"A\"(USD) INC (A)","LU0971096721.USD":"富达环球金融服务 A","LU1363072403.SGD":"Fidelity Global Financial Services A-ACC-SGD","LU1074936037.SGD":"JPMorgan Funds - US Value A (acc) SGD","LU1162221912.USD":"FRANKLIN INCOME \"A\" (USD) ACC"},"translate_title":"油价再度走高对全球市场意味着什么","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{},"content_text":"By Lucy Raitano\nLONDON (Reuters) - Oil prices are up around 16% so far this year near $90 a barrel, with supply worries high given escalating Middle East tensions and tit-for-tat attacks on energy infrastructure between Ukraine and Russia.\nInvestors are paying attention. After all, it was an energy price surge two years ago that helped drive inflation and interest rates higher on a scale not seen in decades.\nThe International Monetary Fund on Tuesday described an \"adverse scenario\" in which an escalation of conflict in the Middle East would lead to a 15% jump in oil prices and higher shipping costs that would hike global inflation by about 0.7 percentage points.\nThe tightness in oil supplies, and higher prices, has been underpinned by oil producing group OPEC and other big oil producers curbing their output.\nMorgan Stanley has lifted its third quarter Brent crude oil forecast by $4 per barrel to $94. With oil prices expected to stay high, we look at the fallout for world markets.\n1/ INFLATION WATCH \nAfter U.S. inflation came in higher than expected for a third straight month in March, the spectre of inflation staying higher has returned with bets on interest rate cuts scaled back sharply.\nSoftening energy prices have been a principal driver of lower inflation expectations recently. Higher oil prices are seen as a threat to this trend.\nA key market gauge of long-term euro zone inflation expectations, which generally track oil, on Tuesday hit its highest since December at 2.39%. The European Central Bank has a 2% inflation target. \nECB chief Christine Lagarde said on Tuesday fresh turbulence in the Middle East had so far had little impact on commodity prices. Oil, while near recent highs, has eased a little this week.\nStill, the ECB has said it is \"very attentive\" to the impact of oil, which can hurt economic growth and boost inflation. \nZurich Insurance Group chief markets strategist Guy Miller said economies can survive, and producers are reasonably happy, when oil is around $75-$95 a barrel.\n\"But were we to see this to break higher then, yes, that would be a concern both from a growth and inflation perspective,\" he said.\n2/ GO ENERGY STOCKS \nEnergy stocks are a clear winner from higher oil prices. The S&P 500 oil index and European oil and gas stocks remain close to record highs.\nU.S. oil stocks have jumped almost 13% so far this year, outperforming the broader S&P 500's 6% gain.\nEd Yardeni, founder of Yardeni Research, said a rise in Brent crude to $100 in coming weeks was a possibility, recommending an \"overweight\" position on energy stocks. \nOil was last above $100 in 2022. It briefly spiked to around $139 after Russia invaded Ukraine, its highest since 2008. \n\"I believe you have to overweight energy as at least a shock absorber in your portfolio in the event that oil prices continue to go higher,\" said Yardeni. \nBarclays head of European equity strategy Emmanuel Cau has had an overweight position on Europe's energy stocks since October, saying the sector tends to perform well in inflationary and stagflationary environments.\nIn contrast, Nordea CIO Kasper Elmgreen said he was negative on energy stocks because the costs associated with an energy transition were not correctly priced yet.\n\"They (energy firms) are going to have to carry a much higher burden for the drive to net zero, and that’s not being reflected in the share price,\" said Elmgreen. \n3/ ROBUST DOLLAR\n2024 kicked off with expectations the dollar would decline as inflation weakens and allows the Federal Reserve to start cutting rates. \nInstead, the greenback is up 4.7% this year as rate-cut bets are slashed. \nHigher oil prices could feed dollar strength.\nBank of America said that while it remained negative on the dollar over the medium term, elevated oil prices meant the U.S. currency had \"upside risks\".\nThat exacerbates pressure on economies such as Japan battling currency weakness, keeping traders nervy over possible intervention to support a yen languishing at 34-year lows.\n\"The yen and the euro will see their terms of trade worsen as energy prices rise. This implies they will be weaker if energy prices rise,\" said Mizuho Corporate Bank senior economist Colin Asher. \n4/ FRESH EM PAIN\nHigher for longer oil prices will also sting many emerging market economies, such as India and Turkey, that are net oil importers.\nIndia's rupee hit record lows against the dollar this week. \nWith oil priced in dollars, many importers are also exposed to higher prices caused by currency fluctuations. \nEven in Nigeria, typically Africa's largest oil exporter, a plunging naira currency has hit government coffers due to capped gasoline pump prices and a lack of local oil refining.\n (Additional reporting by Natalie Grover, Libby George and Amanda Cooper; Graphics by Kripa Jayaram, Prinz Magtulis, Vineet Sachdev, Riddhima Talwan; Editing by Dhara Ranasinghe and Mark Potter)","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2428313059"}