4 ways the Israel-Iran conflict could hit Long Island wallets
Israel's attack on Iran's capital city Friday targeting the country's nuclear program has the potential to escalate and cause worldwide turmoil, including in the Long Island economy.
A wider war with Iran, a major world producer of oil, could slow the flow of Iran’s oil to its customers and keep the price of crude and gasoline higher for everyone worldwide, according to The Associated Press, causing ripple effects leading to increased travel expenses and more cautious consumers, who are already navigating inflation.
Further, the attacks could signal "the beginning of a full-blown war in the Middle East," said Stony Brook University economics professor Juan Carlos Conesa in an email.
If that happened, it could mean "years of open military conflict, a situation that would eventually trigger U.S. involvement" and increase the "already high probability of a recession induced by policy uncertainty over the last months," he said.
WHAT NEWSDAY FOUND
- Israel's attack on Iran could escalate into a wider conflict, potentially disrupting global oil supply and increasing prices, impacting economies worldwide, including Long Island.
- Rising oil prices could lead to higher gas and household energy costs, affecting consumer behavior and contributing to market volatility, which could impact retirement savings and investment portfolios.
- Safe-haven assets like gold and treasuries are gaining value as investors seek stability amid uncertainty.
Here are four things Long Islanders should know about how the Israel-Iran conflict could hit their wallets.
Gas prices on Long Island could keep climbing
Brent crude, the international standard for pricing oil, jumped over 7% to $74.34 per barrel after Israel’s strike on Iran, the largest single-day jump since the Russian invasion of Ukraine, according to an AP report. Bloomberg notes further escalation could drive oil more than $20 higher, directly hitting local pump prices.
The cost per barrel for bent crude was $70.34 on Thursday evening, according to AP.
The Middle East accounts for around a third of global oil production, which means prices on Long Island will be higher, Conesa said.
As oil prices rise, so could the price of gas, said Steve Kent, chief economist for the Long Island Association and professor at Molloy University.
"Whenever there's any major conflict in the Middle East, it affects the price of oil," he said.
Household energy bills may spike as markets react
Kent said he believes that the United States is nearly self-sufficient in producing enough oil for itself and that a rise in household energy bills would be more of a long-term effect from the conflict.
But, he warned, "We are still part of the broader worldwide oil market and that is why if prices go up due to Middle East conflicts, you do see it in gas prices."
Market volatility affects retirement savings and investment portfolios
As oil prices raise, inflation rises, said Kent, making it tougher for the Federal Reserve to lower interest rates.
"If inflation goes up, you keep interest rates relatively high to tamper down the inflation," he said. "When interest rates go higher, that leads to the stock market declining."
Equities fell 1-1.5% globally after the attacks, Morningstar Research Services LLC, a financial services firm in Chicago, reported.
"We’re seeing what we often do in geopolitical shocks: a short-term market selloff driven by uncertainty, not fundamentals," said Jason Gilbert, founder and managing partner of RGA Investment Advisors in Great Neck in an email.
The drop should be temporary, he emphasized, and "in fact, rebalancing during periods like this can create long-term opportunity."
Long Islanders should stay invested and speak with a financial adviser about any uncertainty, he said. "Make sure you have ample liquidity, your investment strategy reflects your time horizon, and that you’re not over-concentrated in any one area."
Safe-haven assets like gold and treasuries gaining ground
When there is market volatility, investors tend to go to safer havens, such as the U.S. dollar, treasuries and gold, Kent said.
Gold climbed to $3,429.94 per ounce, a 1.27% increase, on Friday afternoon, according to Bullion by Post.
The dollar rose 0.9% on Friday, according to Reuters.
The rising price of gold represents a "flight to safety" that tends to happen during periods of uncertainty, Conesa said, noting that while the climbing rate will likely have a "negligible" impact on the Long Island economy, "it is an indication of troubled times" that could mean postponed investments and fewer job openings.
"Prospects were not looking good" for the U.S. economy before the attack, he said, "and now they are looking worse."
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