With Brent crude climbing steadily towards $130 per barrel, fears of an economic slowdown and even a slip into recession have reared their heads among traders.
Oil prices soared as soon as Russia invaded Ukraine. As the conflict escalated and the West began implementing sanctions on Moscow, fears grew over potential action against Russia’s oil industry, which supplies around 7 percent of the world’s crude and is the biggest exporter of crude oil and oil products taken together.
The United States, the world’s largest oil consumer as well as producer, booked an inflation rate of 7.5 percent for January—the highest in almost 40 years—and analysts now expect this to have risen closer to 8 percent in February.
Meanwhile, wheat prices hit a record high amid the Russian-Ukraine conflict as the two are major exporters. Russia, the world’s largest exporter of the staple, has been heavily sanctioned in ways that make it a challenge to lift wheat cargos from the country. The 50-percent jump in wheat prices since the start of the invasion is making wheat more unaffordable.
This is not the end of the rally for oil, according to some analysts. Giovanni Staunovo from UBS, for instance, forecast oil could stabilize around $125 per barrel unless the war drags on, in which case disruptions to global supply would persist, pushing oil to $150 per barrel.
The way things are going now, $200 per barrel is a clear possibility, according to Jeffrey Gundlach from investment firm DoubleLine. He said that it was time to admit the U.S. was going into stagflation, and the latest increase in gas prices was only the beginning of the pain.