Ukraine war update: how record oil prices could affect the U.S. economy

The benchmark S&P 500 index is down another 1.0% on Monday as the United States is expected to announce a ban on Russian oil in response to Putin’s war crimes in Ukraine.

What higher oil prices could mean for the U.S. economy

WTI crude prices are back to near $130 a barrel this morning. According to Edward Jones’ Mona Mahajan, the U.S. economy could take a hit if oil remains at elevated levels. On CNBC’s “Squawk Box”, she said:

If there’s a tail risk, it’s that we see oil at $150 to $200 a barrel and it stays there in a sustained way. Then, I think, we’re looking at true demand destruction. Probably, still 2023 is when we’re looking at the downturn but that’s a tail risk certainly not our base case.

If oil prices sustain at current levels, she added, it would still lead to slower growth but not a recession.

Ukraine war update: latest developments on Tuesday

Also on Monday, Russian Deputy Prime Minister Alexander Novak warned oil prices could soar to at least $300 a barrel if the West shuns Russian energy. Moscow also threatened to cut the supply of natural gas to Europe if such a ban is imposed.

On the other hand, the EU pledged to minimise its dependency on Russian energy by roughly 65% before the start of 2023. Analysts, however, are raising the alarm that alternative sources will fail to completely replace Russian oil.  

A day earlier, President of Yardeni Research said we’re in stagflation due to the war in Ukraine.