oil price shock

The Iran war has caused a 33% oil price shock, but the U.S. labor market shows renewed strength with minimal employment risks compared to past energy crises. Federal Reserve Bank of Boston research indicates this shock would raise inflation significantly but have negligible effects on national employment, shifting central bank focus from stagflation to inflation risks.

Medical supply company Gentell sources raw materials globally, and the crisis at the Strait of Hormuz is causing volatility for its business. The situation highlights supply chain vulnerabilities linked to geopolitical tensions in the region.

Kevin Warsh has been sworn in as the new Federal Reserve Chair, but outgoing Chair Jerome Powell remains on the Fed Board, potentially enabling him to act as a 'shadow chair' and push for rate hikes despite concerns about an oil-price shock. The article argues that rate hikes would worsen economic vulnerabilities in housing, manufacturing, and small-business credit, citing historical precedents where past Fed chairs like Alan Greenspan and Ben Bernanke cut rates during oil shocks.

The Trump administration is considering eliminating LIHEAP, a program that aids low-income households with energy costs, amid an oil price shock. This move could lead to increased utility arrearages, more service shut-offs, and heightened human suffering.