Oil Prices Soared with Growing Investor Predilection for Risk Assets

Oil Prices Soared with Growing Investor Predilection for Risk Assets
Oil prices rising/courtesy of pexels

Oil prices have risen as investors’ appetite for risk assets has grown. Despite steadily rising crude oil prices, which have risen nearly 40% this year, investors have barely noticed. That rise has been easily digested by markets, in part because it represents a recovery from last fall’s collapse in crude prices, when demand weakened due to a slowing global economy (now improving) and supply surged as the US temporarily lifted some sanctions on Iranian oil exports.


A continuation of the upward trend may not be possible with such calm. Oil supply is expected to tighten in the coming quarters as a result of a number of factors, including the United States’ recent decision not to renew waivers allowing Iran to export crude oil, as well as falling output from Venezuela and Libya.


Such circumstances could push crude oil prices even higher, a risk that investors should be aware of now. If you own a lot of high-priced growth stocks, consider buying oil stocks as a defensive move, as they should benefit from higher crude prices.


Rising oil prices may pose a growing risk to the economy and markets for three reasons:


Inflationary pressures are linked to higher oil prices, which could prompt the Federal Reserve to raise interest rates. Because it adds to transportation and raw materials costs for so many products, higher oil prices lead to broader price increases. If inflation rises, the Fed may be forced to raise interest rates later this year, a possibility that markets haven’t factored in, potentially resulting in increased market volatility.

Increasing crude prices would raise gasoline prices, potentially reducing consumer spending. Gas prices in the United States, which have already risen this year, may continue to rise. If they continue to rise, consumer confidence and spending could suffer. Retail sales would almost certainly decline, putting pressure on many companies’ profit margins. Year-over-year gas price comparisons don’t appear to be alarming, but that could change by this fall.

Higher oil prices could jeopardize China’s emerging markets’ fragile economic recovery, especially at this late stage in the business cycle. It’s a double whammy for their consumers if it’s accompanied by a stronger dollar.


Even as stock and bond markets continue to rise, aided by a dovish Fed and stronger underlying US economic growth, I am skeptical that this trend will last. One reason for this is the sharp increase in oil prices this year. Investors who share my concern about rising gas prices should keep a close eye on the market and consider hedging the risk of higher crude by purchasing oil-related stocks.

Read more:


About Robert Oluoch

My focus is economic, politics, entertainment and gaming reviews. My aim is to depict the complication of life through the combination of words and creativity.

Have a tip we should know? tips@rhd.news

Most Read

  1. ARTS
    With a Vengeance and no Apologies, Art Basel Miami Beach Has Returned
    6 months ago
  2. Food
    Is Faux Turkey Finally Vegan-Approved for Thanksgiving?
    6 months ago
  3. News
    Pandora Papers Financial Leak Shows Us the Secrets of the World’s Rich and Powerful
    8 months ago
  4. Health
    US Supreme Court Rejects J & J TALC Cancer Case Appeal
    12 months ago
  5. Lifestyle
    9 Habits that Drain your Daily Focus and How to Avoid Them
    12 months ago
    Women’s Demand for Shapewear – the big Trends
    1 year ago
    Valentino Launches its Cosmetics Line
    1 year ago
  8. Business
    McDonald’s Sales Increase Amid COVID Restrictions
    1 year ago
  9. Health
    US Promises to Share 60 million Doses of AstraZeneca Vaccines
    1 year ago
  10. coronavirus
    UK Offers Aid Amid Surging COVID-19 Cases in India
    1 year ago
  11. Entertainment
    Nomadland Director Chloé Zhao, Wins the Best Director in 2021 Oscar
    1 year ago
    Russia ‘plans to take southern Ukraine’ in the Ukraine war
    4 weeks ago
    Girls’ schools in Afghanistan ordered shut just hours after reopening
    2 months ago
    Ukraine: Surrogate mothers and parents face impossible choices
    2 months ago
    Two women killed in Malmö ‘violence’ at a Swedish school
    2 months ago
    Anonymous: How Hackers are Attempting to Destabilize Putin
    2 months ago
    Boris Johnson Sparks Outrage Comparing the Ukraine conflict to Brexit
    2 months ago
    The Big Talk: War crimes and Russia’s invasion of Ukraine
    2 months ago

Follow @rushhourdaily: