Most of the recent coverage has centered around the geopolitical risks that could boost prices, even if the increase is “only” several dollars per barrel. That’s important from a macro standpoint because one of the first areas that gets reflected in the economy is the price of gasoline. If the price of oil increases, that’s effectively a tax increase for the end consumer, which means that their discretionary spending power is reduced.
The inflation aspect is what makes this particularly important for the markets. If the price of oil increases, that means that inflation could accelerate, which means that interest rates could remain high for longer than people expect. Even if core inflation is calm, the price of oil can have an impact on the service sector through distribution. The takeaway here is that an increase in the price of oil can have the effect of slowing down the economy, which is particularly concerning because that’s the type of environment that makes monetary policy particularly tricky.
https://www.foxbusiness.com/economy/oil-experts-predict-slight-rise-gas-prices-global-tensions-mount
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