As well as checking the news for updates on events in the Middle East, many New Zealanders are also nervously checking their KiwiSaver balances.

What they see is more than a snapshot of their own savings, it’s a window onto world events – in particular the rough ride stock markets are having as the price of oil spikes because of the US-Israeli attack on Iran.

Oil, for better or worse, is the lifeblood of the global economy, a crucial ingredient in many products and the fuel that moves goods around the planet.

A reduction in supply – or even the expectation of reduction – pushes oil prices up. Since the Iran crisis, it has risen from around US$60 per barrel to more than $100, with some analysts saying it could reach $150.

When transport costs rise, prices rise with them and inflation and interest rates follow. Households spend less, businesses sell fewer goods and services, and potentially cut jobs.

Lower economic activity means lower company profits. Higher interest rates reduce future growth. When geopolitical crises erupt, investors become nervous and demand a higher return for taking risk.

Put those forces together and the result is usually the same: falling share prices. Because KiwiSaver........

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