Oil Whipsaws From $119 High. Here are 3 Takeaways for Markets Over the Past Week.

The geopolitical conflict in the Middle East is driving up oil and natural gas prices. That’s a fairly predictable outcome. That said, developments in the conflict are changing rapidly, leading to rather wide swings in the energy market. As you watch oil prices rise and fall, here are three things you need to keep in mind.

1. The impact will ripple through the economy

Motley Fool research shows that inflation has averaged around 3.8% per year. However, rising oil and natural gas prices could lead to a spike in inflation. You will see higher prices at the gas pump almost immediately, but oil and gas are used in the transportation of goods, as key inputs in the manufacturing process, and to produce electricity, among other things. Higher energy costs impact far more than you may realize.

Image source: Getty Images.

As companies feel the impact of higher costs, they will pass them on to consumers. In some cases, such as in the utility sector, mechanisms exist that can directly pass those costs on to consumers. In other cases, the process will happen over time. However, rising energy costs will eventually lead to higher prices across the economy.

2. The risk of a recession is increased

Consumers are already worried about the economy. That’s highlighted by the divergent performance of retailers Target (TGT 1.71%) and Walmart (WMT 1.32%). Target offers a more premium experience and products, and its sales are falling, with same-store sales off by 2.5% in the fourth quarter of 2025. Walmart is focused on everyday low prices, and its sales are rising, with organic sales up 4.6% in the U.S. division in the comparable quarter.

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NASDAQ: WMT

Walmart

Today’s Change

(-1.32%) $-1.65

Current Price

$123.47

Key Data Points

Market Cap

$997B

Day’s Range

$123.05 - $125.46

52wk Range

$79.81 - $134.69

Volume

791K

Avg Vol

31M

Gross Margin

25.40%

Dividend Yield

0.75%

As higher oil and natural gas prices flow through the economy, the risk of a recession rises. In fact, increased uncertainty alone could push consumers to pull back even harder, triggering a recession.

3. Oil prices will eventually fall

Energy prices have always been volatile, so this price spike isn’t actually unusual. Before you run out and buy a pure-play energy producer like Devon Energy (DVN +3.80%), which is highly impacted by oil prices, remember that energy prices have always fallen after a spike. When that happens, energy stocks, which are on the rise now, will likely come back down to earth.

That said, the economic impact of higher energy prices will also recede in time. The pain at the pump will eventually be less of an issue, as will the impact of rising shipping costs. And if the economy has fallen into a recession, that will eventually end, too. In other words, long-term investors should remember the old saying: “This too shall pass.”