Soaring oil prices aren't the drag they used to be on the economy, but history shows sudden price shocks can still pose a danger to equities, says Capital...
As U.S. benchmark crude trades north of $120 a barrel on speculation Washington and its allies could soon move to embargo imports of Russian oil, investors and analysts continue to assess the implications for the stock market.
“History suggests that large disruptions to oil supply, which a proposed ban on imports of Russia’s oil would probably represent, could weigh heavily on the U.S. stock market,” said Thomas Mathews, markets economist at Capital Economics, in a note. Western countries have hit Russia with heavy sanctions aimed at separating its economy from the global financial system. But they had moved to exempt energy exports given soaring global inflation and Western Europe’s heavy reliance on Russian energy flows, though Russian crude has struggled to find buyers as traders and others appeared to “self-sanction” amid fears of running into legal trouble, analysts had noted.U.S.
Nonetheless, oil shocks have spelled trouble for the stock market in the past, he noted, and likely offer some lessons even if the economic circumstances have changed.
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