Fresh military strikes in the Middle East have shattered a fragile ceasefire, sending crude oil prices surging and guaranteeing an immediate spike in fuel costs. This rapid increase, contrasted with sluggish price drops during periods of relief, is driven by a “hidden pattern” that economists have long tracked.
The Rockets and Feathers Phenomenon
While consumers will see their local gas station prices jump almost instantly, relief during the recent ceasefire was frustratingly slow. Economist Justin Wolfers, in a Substack post, describes this “hidden pattern” as an asymmetric economic phenomenon where retail gas prices invariably rise “like rockets, while falling like feathers.”
According to Wolfers’ extensive economic data analysis, when crude oil prices rise, retail gasoline “catches up really quickly,” with most movement landing within a week. Conversely, when oil falls, the financial relief arrives in “slow motion,” dribbling in over several weeks.
Renewed Conflict Triggers Oil Surge
However, President Donald Trump declared an interim accord with Iran effectively “over” after the U.S. military launched new strikes in retaliation for attacks on commercial ships in the Strait of Hormuz.
Consequently, global oil markets reacted immediately, with West Texas Intermediate crude rising to $74.16 per barrel and Brent crude climbing to $78.70.
Market Realities vs. ‘Price Gouging’
During the brief period of declining crude costs, President Trump demanded retailers lower pump prices “IMMEDIATELY,” accusing companies of illegal “price gouging.”
The national average currently sits at $3.7960, far above Trump’s $2.50 target, while drivers in California face average costs exceeding $5.45 a gallon.
Wolfers notes this slow descent isn’t necessarily a conspiracy. The lag often results from consumer search habits—drivers shop less aggressively when prices drop—or “tacit strategic interaction,” where neighboring gas stations simply hesitate to cut their prices first.
Oil Surges Again
At the last check, WTI crude oil futures were trading higher in the early New York session by 0.11% to hover around $73.60 per barrel. Meanwhile, the ETF tracking this, United States Oil Fund LP (NYSE:USO), rose by 3.02% in premarket on Thursday.
Similarly, Brent crude oil futures rose by 0.22% to $78.19, and the ETF tracking it, United States Brent Oil Fund LP (NYSE:BNO), gained by 3.91% in premarket on Thursday.
On the other hand, U.S. stock futures advanced on Wednesday, as the Dow Jones, Nasdaq 100, and S&P 500 indices rose, following Wednesday’s mixed close.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq 100, respectively, were higher in premarket on Thursday. The SPY was down 0.18% at $746.71, while the QQQ declined by 0.62% to $715.84.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Image via Shutterstock
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