As oil prices hit $100 a barrel for the first time since May, Jonathan Raymond, investment manager at Quilter Cheviot, discusses the causes and subsequent implications.
“The resumption of hostilities in the Middle East is forcing a reassessment of supply and demand dynamics in the oil market, pushing the price of oil to $100 per barrel for the first time since May. This is bad news for consumers, businesses, investors and policymakers alike.
“For households, the most immediate impact is likely to be higher petrol and diesel prices at the pump, with energy bills also at risk of rising in the months ahead. More expensive fuel and energy can ripple through the wider economy, increasing costs for businesses and ultimately feeding through into the price of food and other goods.
“This creates another headache for central banks as they continue their battle against inflation. If energy prices remain elevated, policymakers may come under pressure to keep interest rates higher for longer or even raise them. This would come as a blow to mortgage holders and borrowers already feeling the strain. Consumer facing businesses could also feel the effects if households become more cautious and rein in discretionary spending.
“Markets will be hoping this proves to be a short-term blip, which would be much more manageable for markets and the economy at large.”
