April 6 saw international oil prices jump sharply. WTI crude oil broke through $114, rising nearly 3% in a single day. This round of gains is not due to normal supply-and-demand changes; it is mainly because tensions in the Middle East are escalating, and the market is worried about potential disruptions to oil supply.

The Strait of Hormuz is responsible for transporting 20% of the world’s oil. Tight relations between the US and Iran create risks for shipping lanes, and everyone is afraid that supplies could be interrupted. OPEC+ will only increase production modestly in May, which is not enough to meet market demand. On top of that, funds entering the market to speculate are pushing oil prices higher all the way.

On April 7, domestic oil prices were raised. Filling up a tank for a private car now costs more by more than ten dollars. The costs for freight trucks and ride-hailing vehicles increase as well, which ultimately will drive up prices.

With oil prices rising and gold prices falling this time, the main reason is that high oil prices may raise inflation, and expectations of Federal Reserve rate cuts are being delayed—so funds shift to speculating on crude oil. If tensions in the Middle East do not ease, oil prices are also likely to keep rising, and the cost of living will continue to climb.
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