Stocks fell and haven assets like gold gained after a weekend attack on Saudi Arabian oil facilities sent crude prices surging. Brent crude rose 10% to $66.37 a barrel. The attacked on Saudi oil production facilities knocked out 5.7 million barrels of daily production. President Trump authorized the release of oil, if needed, from the Strategic Petroleum Reserve to help offset cost increases.
Bond prices are relatively flat, and the 10-Year Treasury is yielding 1.864%. The Federal Reserve is scheduled to meet this week and markets are pricing in another interest-rate cut of a quarter point. Central banks are likely to look through the inflationary impacts of higher oil prices but the added geopolitical risk to an already fragile backdrop will not go without notice. The higher oil prices could increase inflation and possible influence the Fed to think twice before cutting rates again. A sustained increase in fuel prices could be the latest threat to a world economy that is already under pressure from the U.S. – China trade dispute. It could weigh on consumer spending as higher prices can raise gas and heating bills, cutting into available income.