Oil Prices Drop Despite Iran Strikes; Fed Likely to Look Past Oil Price Spikes
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Oil prices are falling despite Iran's missile strikes against Israel, with markets initially shrugging off geopolitical tensions. Still, analysts expect prices could jump over $100/barrel.
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UBS's Jason Draho believes geopolitical shocks likely won't "seriously disrupt" the US macro picture, though they remain a risk to monitor.
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Draho sees core inflation continuing a downward, if bumpy, trend based on indicators like declining rents and moderating wage growth.
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The Fed tends to look through oil price spikes and focus more on trends in core inflation and the labor market.
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Oil prices would likely need to spike over $120/barrel to significantly impact US consumer spending and the economy due to US oil production levels.