LIVE MARKETS-Spiking gasoline prices and the US consumer: A midterm game changer?

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

SPIKING GASOLINE PRICES AND THE US CONSUMER: A MIDTERM GAME CHANGER?

With the U.S.-Israeli war on Iran nearing the end of its third week, surging oil prices have rattled world markets and launched gasoline prices into the stratosphere.

In its "Short-term Energy Outlook Amid the Middle East Conflict," the U.S. Energy Information Administration projected average U.S. gasoline prices would rise 7.7% in 2026 to $3.34 per gallon. But a look at weekly data shows that as of March 12, prices at the pump have jumped 24.6% since the beginning of the year.

What does this mean for American consumers, who carry about 70% of the U.S. economy on their backs?

"For most Americans, transportation is their own car, and gasoline is a significant component of their variable spending," says Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. "And when you're playing at the margins and you're just trying to make it to the next month and the next paycheck, a little bit here and a little bit there has an outsized impact."

One place to watch for that impact is the personal savings rate.

The most recent data, provided as part of the Commerce Department's Personal Consumption Expenditures (PCE) report, shows the saving rate was 4.5% in January. While that's an improvement over December's 4.0% reading, it's below the 5.10% rate a year ago, and far short of the long-term average of 8.39%.

This data predates the war.

The savings rate, or the unspent portion of disposable income, is widely viewed as a barometer of consumer health and expectations. And as seen in the graphic below, it tends to move in opposition to gasoline prices. When petroleum prices jump, the savings rate falls.

In the coming months, should the savings rate go down and credit card balances rise, it's a fairly good sign that Americans are having a harder time making ends meet.

This being an election year, the Trump administration has taken note.

U.S. Vice President JD Vance and other administration officials plan to meet with oil executives at the American Petroleum Institute to address spiking crude prices, according to a Bloomberg report. And Trump is expected to announce it will temporarily lift federal smog-cutting restrictions on summer blend gasoline in an effort to rein in prices at the pump.

"Politically speaking, given that it's a midterm year, Republicans are very worried about that because, you know, Donald Trump ran on putting an end to inflation," Pursche adds. "The vast majority of Americans know how much it cost them to fill up their tank of gas."

"It's there. It's in your face."

(Stephen Culp)

EARLIER ON LIVE MARKETS:

SOME SHORTER-END TREASURY YIELDS REFLECT GROWTH FEARS – BARCAP CLICK HERE

WALL STREET TRACKS TOWARD FOURTH STRAIGHT WEEKLY LOSS AS IRAN WAR ESCALATES CLICK HERE

FROM COMPLACENCY TO FEAR: EQUITY PUT/CALL RATIO SWING HAS TRADERS ON ALERT CLICK HERE

IF YOU THINK THE ECB WON'T HIKE SOON, CAN YOU TRADE IT? CLICK HERE

NO SYSTEMIC RISK FROM PRIVATE CREDIT, UNICREDIT SAYS CLICK HERE

U.S. ECONOMY CAN'T SHRUG OF HIGH OIL PRICES AS IT DID 15 YEARS AGO CLICK HERE

CAUTIOUS TRADING CLICK HERE

BEFORE THE BELL: EUROPEAN FUTURES HIGHER, BUT STOCKS SET FOR A WEEKLY DECLINE CLICK HERE

MORNING BID: HAWKISH RATE REPRICING HALTS THE DOLLAR'S RALLY CLICK HERE