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Middle East Unrest Isn’t the Threat to U.S. Stocks that it Used to Be

Energy prices have risen in response to renewed tensions in the Middle East as traders weigh threats to regional oil supplies. Stock prices, on the other hand, have had a more muted response — a testament to the diminishing influence of Middle Eastern energy markets on the U.S.

Domestic U.S. oil production has roughly doubled just this decade, largely due to the revolution in shale drilling. Higher domestic production makes the U.S. economy less reliant on imported oil and therefore less sensitive to unrest overseas. More broadly, the U.S. economy is less sensitive to oil prices than in the past. Thanks to increased energy efficiency, the U.S. economy has grown by nearly eight-fold over the past 40 years, while oil consumption is essentially flat.

We believe energy prices would have to rise meaningfully higher before triggering an economic slowdown. One threshold in this regard would be gasoline above the psychologically important level of $4 per gallon — well above today’s national average of $2.82.

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

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