Commodities | Global | Rates | US
Summary
• Oil prices are now up 30% since the start of the year, thanks in part to the Russia/Ukraine conflict. This will impact both growth and inflation.
• We look at three oil shock episodes: the 2007/8 spike, the 1990 Iraq War, and 1973 Yom Kippur.
• We find that in all three cases the US curve (2s10s) steepened. This suggests US flattening trades could be at risk.
Aside from the pandemic, we’ve also been highlighting the importance of the energy shock on both inflation and growth. In an earlier Rates Weekly, we showed how rising oil prices have led to higher core goods prices and we flagged US recession risks on higher oil prices as one of our Grey Swans for 2022. With the escalation of the latest Russia/Ukraine conflict, oil prices have surged higher. Oil prices are now over 30% higher since the start of this year. This will have an impact on both inflation and growth.
Summary
• Oil prices are now up 30% since the start of the year, thanks in part to the Russia/Ukraine conflict. This will impact both growth and inflation.
• We look at three oil shock episodes: the 2007/8 spike, the 1990 Iraq War, and 1973 Yom Kippur.
• We find that in all three cases the US curve (2s10s) steepened. This suggests US flattening trades could be at risk.
Aside from the pandemic, we’ve also been highlighting the importance of the energy shock on both inflation and growth. In an earlier Rates Weekly, we showed how rising oil prices have led to higher core goods prices and we flagged US recession risks on higher oil prices as one of our Grey Swans for 2022. With the escalation of the latest Russia/Ukraine conflict, oil prices have surged higher. Oil prices are now over 30% higher since the start of this year. This will have an impact on both inflation and growth.
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