Oil prices continued to climb on Wednesday as the disruption to Persian Gulf energy supplies persisted. The effects are being felt far beyond the region, with the average price of U.S. gasoline setting a record high since the start of the war in Iran.
The rise in energy costs is a concern for investors, but stock markets have been buoyed by solid corporate earnings, keeping indexes elevated. Traders are also looking to officials at the Federal Reserve, who announce their latest decision on interest rates on Wednesday, for guidance on the outlook for inflation, economic growth and interest rates.
Oil keeps rising.
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The price of Brent crude, the global benchmark for oil, jumped more than 5 percent, to around $109 a barrel for July delivery. This grade of crude traded for about $90 less than two weeks ago and $72 a barrel just before the war started.
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West Texas Intermediate crude, the U.S. benchmark, traded above $105 a barrel for June delivery, also up more than 5 percent on the day.
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Investors and analysts are focused on the continued disruption to shipping in the Strait of Hormuz, the narrow waterway between Iran and Oman that is a vital trading route for oil and natural gas that normally carries as much as one-fifth of the world’s oil supply.
Gasoline prices jump to another postwar high.
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Gas prices rose again on Wednesday, jumping to a national average of $4.23 a gallon, a fresh high since the start of the war in Iran. The increase has raised the cost for drivers by 42 percent, according to the AAA motor club.
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Gas prices don’t move in lock step with crude, usually trailing increases or drops by a few days.
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Diesel prices have increased even more quickly and stood at $5.64 on Wednesday, up 50 percent since the start of the war.
Stocks hold steady.
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The S&P 500 was down slightly on Wednesday. But the blue-chip U.S. index remains near record highs, buoyed by solid earnings at the country’s largest companies.
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In Europe, stocks posted small declines. The Stoxx 600, a broad index that tracks the region’s largest companies, fell nearly 1 percent.
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Stocks in Asia, where countries import vast quantities of oil and gas, were mixed. Japan’s Nikkei 225 fell but indexes in South Korea and Hong Kong posted gains.
What they are saying: Can consumers ‘ride out’ the gasoline shock?
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“Higher gasoline prices are stretching household budgets, with the greatest impact on lower-income consumers,” analysts at Bank of America wrote in a recent report. According to credit and debit card data, American consumers spent 16.5 percent more on gasoline in March than the month before, the analysts noted.
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“There may be capacity for some to ‘ride out’ a gasoline shock by relying more on credit card borrowing,” they wrote, but “this appears somewhat limited — particularly for lower-income households.” Across income levels, savings and deposits have been running historically high, the analysts said, and bigger tax refunds may provide an extra cushion. “Higher refunds could cover rising gasoline bills for at least five months,” they wrote.
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