Nucleus Wealth Insights

In this rapid insight episode, we explore the impacts of surging oil prices on inflation, amidst the backdrop of the Middle East conflict and its complex geopolitical dynamics. The conflict, acting as a proxy war involving various global powers, has led to a rise in oil prices. From here, it can go two ways: a cost-push inflation spiral or demand destruction due to squeezed household budgets. We analyze the situation from three main perspectives: geopolitics, cost-push inflation, and demand destruction. At face value, rising oil prices can result in higher inflation as transportation and production costs increase, potentially leading to higher wage demands, cycling higher. On the flip side, high fuel costs can also squeeze household budgets. In the past, oil prices above $100 have led markets to extrapolate consumer demand destruction. We also look at a potential reduction in oil demand as people look for more economical alternatives, such as electric vehicles, but conclude that battery prices are not low