Charles Schwab chief investment strategist Liz Ann Sonders warned that oil prices could spike significantly if the Strait of Hormuz remains closed due to the US-Iran conflict. Sonders cited statements from Chevron and Exxon leaders last week indicating oil could reach $150 per barrel in a matter of weeks without the strait reopening, driven by low stockpiles. The warning comes amid ongoing uncertainty over the waterway's status, with the strategist noting that time is working against economic optimism as oil price pressures mount.
Chevron and Exxon Leaders Cite $150 Oil Price Scenario
Sonders stated in an interview on Bloomberg Television that energy company executives have issued stark warnings about near-term price movements. "I think it was last week that leaders within both Chevron and Exxon came out and said that given how low stockpiles are that without a relatively imminent opening of the Strait of Hormuz and getting that oil flowing again they cited numbers as much as $150 in a matter of a few weeks," Sonders said.
The strategist emphasized the urgency of the situation, stating, "We are on the brink of what potentially could be a more significant spike." She noted that an inverse correlation currently exists between oil prices and the stock market, though repeated announcements of imminent deals that fail to materialize have created uncertainty.
S&P 500 Members Experienced Average 22% Drawdown
Sonders also addressed stock market correction risks, highlighting divergence between index-level performance and individual stock performance. "The S&P at the index level didn't have a correction level maximum drawdown this year. Its weakness in February and March hit 9%," she stated.
However, examining individual components reveals deeper declines. "If you go member by member in the S&P 500 and look at their individual maximum drawdowns and then take an average of that, it's negative 22%. In the case of the Nasdaq, the average member maximum drawdown is negative 38%," Sonders said. She suggested corrections could continue through rotation rather than broad index-level declines.
FAQ
What price did Chevron and Exxon leaders cite for oil?
Chevron and Exxon leaders stated last week that oil prices could reach $150 per barrel in a matter of weeks if the Strait of Hormuz does not reopen relatively soon, according to Charles Schwab's Liz Ann Sonders.
What was the average drawdown for individual S&P 500 members?
The average maximum drawdown for individual S&P 500 members was negative 22%, while the S&P 500 index itself experienced only a 9% decline in February and March, according to Sonders. For Nasdaq members, the average drawdown was negative 38%.
