Oil broke above $100 a barrel this month for the first time since 2022. The war in Iran has disrupted the Strait of Hormuz, gasoline prices are surging, and the S&P 500 just posted its first three-week losing streak in about a year. As panic sets in, observers wonder whether this is actually recessionary.
- USO is moving. See the chart and price action here.
Fidelity Investments says not yet — and unlike most Wall Street commentary that deals in vague reassurances, Fidelity put a specific number on it. The number is $135.
In recent market commentary, Fidelity’s director of quantitative market strategy Denise Chisholm and members of the firm’s Asset Allocation Research Team presented the math.
At approximately $135 to $145 per barrel, American households would spend 5% or more of their income on energy — a threshold that has historically marked the point at which consumers cut back hard enough to drag down the broader economy.
At today’s prices, with Brent around $103 and WTI near $99, there’s a cushion of roughly $32 to $42 per barrel between an oil shock that feels scary and one that actually breaks something.
Why 5% Is The Line
Throughout modern economic history, consumer spending has been resilient to oil …
This post was originally published here
