Hey market watchers,

Tensions in the Middle East are unlikely to resolve soon.

Unfortunately, that leaves room for a worsening conflict or all-out war. Monday’s stock sell-off suggests traders are preparing for turmoil.

Today, we will unpack the implications for oil markets.

You’ll want to pay attention even if you’re not a commodity trader — history suggests high crude prices can be an opening act for an economic downturn.

*At a glance:

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Oil, gas prices, and the White House

Brent crude, the international oil benchmark, has climbed 18% this year.

Prices are hovering at $90 a barrel, and traders are now bracing for escalation between Iran and Israel following this weekend’s missile strike:

• Citi said barrels could touch the $100 mark if direct conflict breaks out

• Societe Generale said Brent could move as high as $140

• The IEA said global crude supply is at greater risk

Among the many oil forecasts released Monday, the most notable to me was actually one that looked backwards.

In a note to clients, DataTrek cofounders Nicholas Colas and Jessica Rabe highlighted how sudden spikes in oil prices have preceded past recessions.

“The Mideast has been a constantly tumultuous part of the world for decades, but the only time that fact affects capital markets is when the price of crude oil spikes,” the strategists said.

While oil prices do not usually remain at crisis-level for long, prior oil shocks — in 1973, 1979, and 1990 — did indeed occur just before an economic downturn.

“Rising oil prices are the biggest concern from an inflationary perspective,” Kpler’s lead oil analyst Matt Smith told me last night.

Remember, expensive crude trickles down to everyday Americans via gas prices.

When those prices go up, consumers have to cut back on other spending.

Smith said the US economy looks resilient enough to withstand any oil price spikes for now, though it’s possible lofty gas prices continue to push inflation higher.

On Monday, the average pump price in the US was $3.63 a gallon.

In Smith’s view, the economy won’t be in serious trouble until that reaches $4.

The DataTrek team, meanwhile, said a recession would become a real possibility if gas hits $5.40 a gallon — which would imply oil prices of about $125 a barrel.

And not for nothing, higher gas prices bode poorly for the Biden administration’s chances at the polls.

“Everyone from President Biden down to the most junior White House staffer knows this math,” Colas and Rabe said. “There will be tremendous political pressure from the current administration on every Mideast country to avoid an oil price shock going into the US general election in November.”

Elsewhere:

• Tesla will layoff 10% of its staff. The stock tumbled more than 5% in Monday’s trading session. Elon Musk’s explained the decision in a memo to staff. (CNBC)

• Goldman Sachs crushed its first-quarter earnings. Profits climbed 28% as revenue from investing banking and trading soared. The bank’s shares gained roughly 3%. (BI)

• UBS shared a bold interest-rate forecast. The firm’s base case is for two rate cuts in 2024, but an inflation rebound could push borrowing costs to 6.5% next year. (Bloomberg)

Rapid-fire headlines:

• China’s GDP beat expectations to start 2024 (Reuters)

• March retail sales data were a “blowout” (FT)

• Apple stock fell as iPhone shipments plunged 10% in Q1 (Barron’s)

• Housing inventory is rising across most of the US (ResiClub)

• Gold and copper prices have carried on their banner year (Bloomberg)

Last thing:

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