March 5, 2026
By Matthew Vegari, Head of Research
The price of oil has now risen 32% year to date, with a 13% jump (to $76/barrel) since the start of the joint US-Israel campaign in Iran. In light of recent market volatility, the Research Desk investigated equity holdings across institutional investor portfolios to gauge exposure and upside/downside risk. In this brief, we also assess the macroeconomic implications of ongoing geopolitical tensions: As we often note, what drives the news cycle does not necessarily drive the economy. The bar for a recession is extremely high, and, at recent oil price levels, the US is well poised to absorb such a shock.
Direct exposure to energy—individual stocks or commodities indices—accounts for approximately 3-4% of equity portfolios in Clearwater’s proprietary database. This weighting looks much like energy’s share of larger equities indices, where the sector comprises ~3% of the S&P 500. Limited exposure is a function in part of deliberate portfolio construction that has favored technology and communications over the past several years (as noted in our Feb. 9 brief).
The implication? Most portfolios won’t see dramatic upside from energy stock appreciation. For those with concentrated positions in producers, the gains will be meaningful but insufficient to offset broader portfolio volatility.
Indirect exposure follows energy as an input. Here, the picture grows more nuanced. While the US economy as a whole is less energy dependent than decades past, higher input costs don’t make life easier for firms whose margins have already been squeezed by tariffs, e.g., food manufacturers and retailers. Beyond goods-producing sectors, consumer services face their own renewed pressures: energy-reliant airlines and cruise lines will see margins compress as fuel costs rise. Their customer bases will be tested yet again, as higher costs put downward pressure on purchasing power, especially at the lower end of the income spectrum.
Institutional portfolios maintain an average 11% combined exposure to these categories. But here’s where the story gets interesting: Many asset owners have been quietly (and, perhaps, inadvertently) insulating themselves from downside risk.
Over the past few years, private wealth investors have cut consumer sector exposure by 5 percentage points (median). That capital has largely been redirected to communications and technology, as investors chase the AI trade. As we documented in our Feb. 9 brief, this wasn’t passive drift but deliberate repositioning. Private wealth portfolios are more insulated from an oil shock today than they were in 2022.
How high will prices rise? The literature is varied, but estimates typically run from 0.2 to 0.5 percentage points increase in the consumer price index resulting from a sustained 10% increase in the price of oil. In December, the Fed estimated 2.4% headline PCE inflation for the end of the year. On the high end from the recent price jumps—not our base case at all—a 0.5% increase would situate things at 2.9%, well above the Fed’s 2% target.
Such an increase will disgruntle consumers, especially as the price of gas is felt acutely. What matters, however, is a sustained rise in price, not a temporary spike. If oil settles back toward $65-67/barrel—where it traded for much of late 2025—the inflationary impulse fades quickly.
At today’s levels, consumption will be dented, not demolished. The consumer is still poised to weather the storm with positive real wage growth and healthy balance sheets. Corporates maintain elevated cash positions, and household debt service ratios remain manageable. The bar for recession remains extremely high.
This macro resilience will keep the Fed from blinking. Price stability will take the driver’s seat again, despite ongoing pressure from the White House for cuts.
Additional research by Tyler Busby, Data Scientist