If you were to ask a regular consumer what a barrel of crude oil costs, they likely wouldn’t know the exact figure. Ask them how much it takes to fill up their car with a tank of gas, on the other hand, they might remember down to the cent.
The visibility of oil price rises in the mind of U.S. consumers is ultimately the factor that will move the needle on the health of the U.S. economy, warns Wharton’s Professor Jeremy Siegel. Indeed, when consumers begin to raise their price expectations is when Wall Street will really begin to worry.
So far, despite the geopolitical consternation in the Middle East since the U.S. and Israel launched strikes on Iran, markets have been volatile but haven’t spiralled too far downward. This is partly because traders, worried about sustained disruption to supply out of the Gulf region, have been betting on hopes that President Trump’s action in Iran will conclude within a matter of weeks.
But the headlines are beginning to trickle into the wallets of U.S. consumers, which is when the knock-on effects of inflation expectations and wage-price spirals (when workers demand higher pay to finance an increased cost of living, pushing up business costs in turn) kick in.
