War and oil: the themes defining this year's economy

A few days ago, I shared my worries about oil prices, and it turns out I was right. Prices are still climbing. Today, it looks like oil might even break $120 per barrel.

The main reason is the Strait of Hormuz. Because Iran controls this narrow water path, Middle Eastern countries can’t get their oil out to the rest of the world. Since they can’t ship it, their storage tanks are getting full, and oil fields are starting to cut back on how much they pump.

Surprisingly, this has been great news for Russia. Last week, while most markets were struggling, the Russian stock market was the only one that seemed to be going up.

The U.S. isn’t really worried about running out of oil. As long as the price stays above $70, American companies can pump plenty of shale oil and still make a good profit. The real problem for the U.S. is inflation. Oil is the base of almost every cost in our lives—from the gas in your car to the food on your table. High oil prices make everything more expensive.

We need to watch these conflicts very closely. Oil will have a huge impact on stocks, bonds, and interest rates this year. Keep your eyes on the data.