Oil Price Hike Sparks Warning of Inflation and Stock Market Crash

According to Daniel Kalt, chief economist of Swiss bank UVS, the global economy has shown greater resilience than expected to geopolitical and energy shocks. However, a prolonged oil price hike could still lead to inflation, higher interest rates, and an end to the stock market rally.

Kalt predicts that if oil reaches $150-$200 per barrel, 'the game is on.' He attributes the global economy's ability to withstand shocks to the release of strategic oil reserves by the US and China, as well as a reduced dependence on oil due to increased energy efficiency.

Simulations by UVS suggest that sustained high oil prices could lead to inflation in the US reaching 5% if oil remains above $120 per barrel for six months. This would put the Federal Reserve in a difficult position, forcing them to tighten monetary policy instead of lowering interest rates.