Fears of 1970s-style stagflation arise with oil spike to $100. How big a threat is it?

In this article

With oil spiking to $100 a barrel and the job market essentially paralyzed, the threat of stagflation again is looming over the U.S. economy and financial markets.

High inflation and slow growth present a double threat, as stimulative measures such as interest rate cuts and government spending only aggravate inflation. Persistently higher prices in turn can put a damper on the labor market as well as the consumer spending that drives more than two-thirds of the U.S. economic engine.

“I have been concerned about the threat of stagflation for a long time, in part because there are so many different inflationary pressures on the economy,” CME Group chief economist Erik Norland said. “You have huge budget deficits, inflation above target, and central banks are easing policy anyway. And then you add to that $100 per barrel oil.”

Markets were rattled again Monday over the prospect of prolonged fighting in the Middle East. Early in the session, U.S. crude oil soared past the $100 a barrel mark for the first time since 2022, though prices eased heading into the afternoon.