History has a way of repeating itself in the financial markets, often using the same catalyst: the price of a barrel of crude oil (CBK26). As geopolitical tensions escalate, investors are looking nervously at their portfolios, wondering if we are witnessing the opening chapters of a familiar tragedy. In July 2008, oil prices spiked to a staggering $147 a barrel. Just 60 days later, the stock market began a historic collapse. Given that the Iran war commenced on Feb. 28, the clock may be ticking once again.
The relationship between energy costs and equity performance is rarely a coincidence. While the Great Recession of 2008 was primarily driven by the housing crisis, record-high oil prices acted as a final, unsustainable weight on the global economy. When oil prices reach levels that consumers simply cannot sustain, a massive economic correction becomes inevitable.
