Oil prices pressing on stocks

NEW YORK – Investors may feel the effects of high oil prices in their stock holdings as well as their fuel bills.

The latest spike in crude oil futures, which now hover above $56 per barrel, sent stocks tumbling this past week as investors, rightly so, feared that price hikes could soon ripple throughout the economy and trigger inflation.

Rising oil prices pressure every sector of the stock market, except for energy stocks. And if the Federal Reserve hikes interest rates more rapidly to combat the inflationary threat, economic pressures could also drive stocks lower.

The various scenarios leave few places for portfolios to hide. Barring any abrupt disruption of oil supplies – a terrorist attack on oil facilities is one of the market’s fears – oil prices are likely to peak in the short term. Of course, the problem with the short term is that it could be anywhere from a week to six months away.

Some investors may want to jump into oil stocks, given their amazing track record over the past three months, even if it’s just for the short term. The problem with that, analysts said, is that nobody knows when, or if, oil prices will come crashing down.

“It’s the classic investor mistake,” said John Lynch, chief market analyst at Evergreen Investments.