The Oil Price, AI, and a Strong Economy: When the Strait of Hormuz was closed, oil prices surged sharply. This immediately pushed up inflation expectations, leading to speculation about potential interest rate hikes by central banks. The next dominoes to fall were rising long-term interest rates and declining equity markets. The US dollar also strengthened, at least against the euro.
For some time now, however, this reaction pattern has changed. While falling oil prices are still viewed positively by equity markets, rising energy prices no longer appear to have much impact on stock indices, which continue to move higher regardless. How come?
