Americans paid an average of $4.27 for a gallon of regular gasoline in the week of October 26, $1.23 more than a year earlier, while diesel averaged $6.35.¹ Behind those numbers is crude oil. The U.S. benchmark, West Texas Intermediate (WTI), settled at $102.78 a barrel on October 28² before sliding below $98 on Monday, November 2, as reports suggested more time for U.S.–Iran diplomacy. Even after that drop, oil was roughly 60% higher than a year ago.³

Energy prices matter well beyond the gas pump. They feed into shipping, airfares and the cost of everyday goods. Right now they are the main reason inflation remains above the Federal Reserve’s 2% target, and a key reason the Fed is weighing another rate increase.

With headlines swinging between escalation and diplomacy, what should long-term investors keep in mind?

Why oil prices are so high

The main driver is the conflict between the U.S. and Iran, which has disrupted energy supplies from the Persian Gulf for much of 2026. Last week brought another attack on a Saudi refinery, which pushed WTI above $102 a barrel.⁴ Prices then fell more than 5% on Monday after reports that Washington wants to give negotiations more time and that Iran has approved talks to end the conflict.³

Some background helps explain why oil reacts so sharply to these headlines. A large share of the world’s seaborne crude passes through the Strait of Hormuz, a narrow channel between Iran and Oman that links the Persian Gulf to the open sea. When tankers cannot move freely, buyers compete for the barrels that are still available. Because people and businesses cannot quickly cut back on fuel, prices rise quickly. Economists call this a supply shock: prices climb because supply is constrained, not because the economy is overheating. Past episodes, from the 1970s oil embargo to the 1990 Gulf War, show that such shocks can be painful, but they have often eased once supply routes reopened or new sources were found.

The chart below shows how abruptly prices moved this year after several calm years.

WTI crude oil monthly average spot price, January 2023 to September 2026 — Source: U.S. Energy Information Administration, WTI spot price (Cushing, OK), monthly average, through September 2026. Chart: NewEra Wealth Advisors.⁵

From the gas pump to inflation

Higher fuel costs are showing up clearly in the inflation data. The Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, rose 3.6% in the 12 months through September. Core PCE, which excludes food and energy, rose 3.1%.⁶ The consumer price index rose 3.7% from a year earlier in September, with energy the main driver.⁷

The pain is close to home. Regular gasoline averaged $4.02 a gallon in Florida in the week of October 26, up $1.16 from a year earlier, and diesel costs even more.¹

U.S. regular gasoline monthly average retail price, January 2023 to September 2026 — Source: U.S. Energy Information Administration, U.S. regular gasoline retail price (all formulations), monthly average, through September 2026. Chart: NewEra Wealth Advisors.⁸

The gap between headline and core inflation is the key point. Interactive Brokers senior economist Jose Torres wrote on October 28 that “pricey crude continues to be the predominant influencer of above-target inflation.”⁴ In other words, much of today’s extra inflation traces back to a single source.

PCE inflation, headline versus core, year-over-year, January 2024 to September 2026 — Source: U.S. Bureau of Economic Analysis via FRED, Federal Reserve Bank of St. Louis. PCE and core PCE price indexes, % change from a year earlier, through September 2026. Chart: NewEra Wealth Advisors.⁹

Longer-term inflation expectations have stayed calm. BNY’s John Velis noted on October 27 that a widely followed market gauge of expected inflation five years from now has barely moved since before the war with Iran.¹⁰ That suggests investors still see the energy shock as temporary rather than a lasting shift in prices.

How central banks are responding

The Federal Reserve raised its benchmark rate in September⁷ and held it at 3.75%–4.00% on October 28. The vote was 10–2, with two officials preferring another quarter-point increase, and the statement noted that “inflation remains elevated.”¹¹ Ahead of the meeting, markets were pricing about 0.70 percentage point of further rate increases, and a hike in December was widely expected.¹⁰

Canada’s central bank has already moved. The Bank of Canada raised its policy rate to 2.50% on October 28, its first increase in three years, warning that elevated energy prices could spill over into broader inflation.¹² The message from both central banks is similar: they are watching for signs that higher fuel costs spread into wages and other prices.

Bond markets have calmed somewhat. The 10-year Treasury yield ended October at 4.94%, down from 5.31% on October 5.¹³ The economy has also held up well: GDP grew at a 3.4% annual rate in the third quarter, up from 2.2% in the second.¹⁴ Strong growth gives the Fed room to stay focused on inflation.

What it means for portfolios

For stock investors, the picture has been mixed rather than dire. The S&P 500 was up 10.7% for the year through October 30, despite a volatile final week of the month.¹⁵ Market leadership has also broadened. Through October 29, the technology-heavy Nasdaq 100 was down 3.3% for the month, while an equal-weighted version of the S&P 500, which gives every company the same weight, had gained 5.7%.¹⁶

Diversification has done its job on difficult days. During the October 30 selloff, energy, consumer staples, utilities and health care stocks were trading higher at midday as money moved toward more defensive areas.¹⁷ Higher energy prices cut both ways: they squeeze household budgets and raise costs for many businesses, but they support energy producers, and the U.S. is now one of the world’s largest oil producers. Higher bond yields also mean investors are again earning meaningful income from high-quality bonds.

A few general principles can help in an environment like this:

Expect headline-driven swings. Oil can move several percent on a single report, in either direction.
Let diversification work. Sectors and asset classes respond differently to energy shocks, which can soften the impact on a portfolio.
Plan for inflation. Long-term plans should allow for periods when prices rise faster than expected.
Rebalance with discipline. Volatility can pull allocations away from their targets; bringing them back keeps risk in line with your plan.

Navigating an energy shock. We continue to watch how oil prices feed into inflation and interest rates, but we do not build portfolios around guesses about the next headline from the Persian Gulf. Our focus remains on disciplined, diversified portfolios, balanced across stocks, bonds and sectors that respond differently to energy prices, and built around each client’s long-term objectives and risk tolerance.

References

Securities offered through Bolton Global Capital, Inc., 579 Main St., Bolton, MA. Member FINRA, SIPC 978-779-5361. Advisory services offered through Bolton Global Asset Management, a SEC registered investment advisor.

The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. The views and other information provided are subject to change without notice and are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient. Nothing herein should be construed as a recommendation or a solicitation or offer to buy or sell any security. Past performance is not necessarily a guide to future results, and forecasts and estimates are not guarantees. Charts were prepared by NewEra Wealth Advisors from publicly available data published by the U.S. Energy Information Administration and the U.S. Bureau of Economic Analysis (via the Federal Reserve Bank of St. Louis FRED database); they are provided for illustrative purposes only. Interactive Brokers, J.P. Morgan Asset Management, BNY, Bloomberg, IG and the other sources cited are not affiliated with NewEra Wealth Advisors or Bolton Global Capital.

Oil Near $100: What Higher Energy Prices Mean for Investors

Oil Near $100: What Higher Energy Prices Mean for Investors

Why oil prices are so high

From the gas pump to inflation

How central banks are responding

What it means for portfolios

References

More Market Insights

Midterm Elections and Markets: What Investors Should Know

Tech Stocks Stumble: Putting the AI Selloff in Perspective

Next PostMidterm Elections and Markets: What Investors Should Know