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Why does the price of oil rise so much on Monday morning?
There are several explanations for the price of oil reaching almost $120 a barrel on Monday morning. The situation in the Middle East partly worsened over the weekend. The fact that the US has sent its diplomatic staff home from Saudi Arabia and that several attacks have targeted civilian infrastructure such as desalination stations are signs that violence will escalate. Furthermore, the Strait of Hormuz is still effectively closed and help, for example in the form of military convoys, does not appear to be coming quickly. It’s a sign that only now seems to have fallen in earnest.
How does this affect the stock market?
Very negative, although the situation is still unclear. Asian stocks are falling across the board, with futures trading pointing to further declines when European markets open at 9 a.m.
The fact that the price of oil was above $100 is bad enough, but it only becomes financially difficult if it stays there. Such high oil prices are putting a strain on the global economy, both hampering demand and risking fueling inflation. It’s a situation that doesn’t bode well for the stock market.
Seen in this light, it is not surprising that we saw a small upturn again when the British Financial Times published information that, as in the context of the outbreak of war in Ukraine, the G7 countries will hold talks in 2022 on opening up their strategic oil reserves to counter the crisis. This would create a buffer for both the real economy and the financial markets. However, the data is unconfirmed and there is no guarantee that the talks will result in more oil on the market.
Is there anything that escaped the oil spill?
The only clear winner on the global financial markets on Monday morning is the US dollar, which appears to have regained its status as a safe haven in the current conflict.
The Middle East conflict differs from last year’s trade crisis, for example, in that the United States appears to be a relative winner, at least in the short term. The U.S. is a net exporter of fossil fuels, which provides a buffer against rising energy prices even as they hit American households. If everything collapses, U.S. assets may appear to be the best in a world full of bad options. If inflation rises again due to the energy shock, this will give the dollar additional support.
Read more:
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In this way, the USA benefits from the EU’s urgent gas needs
