Here's why surging oil prices may not derail the consumer trade

• Oil shock hitting consumers hard: California gas averaged $5.98/gallon as of Wednesday, 41% above the national average which hit a new 2026 high
• Consumer staples seen as resilient with products like 'diapers and toilet paper' expected to sell regardless of geopolitical conditions
• Retail sales data shows strength with March growth continuing for consecutive periods, driving bullish sentiment in consumer discretionary stocks despite recent punishment

Summary

Despite surging oil prices amid Iran war fallout, financial strategists maintain a positive outlook on consumer stocks during a major Big Tech earnings week.

Key Figures and Data

YieldMax Chief Strategist Mike Khouw highlights the oil shock's impact on consumers, particularly in California, where unleaded gasoline averaged $5.98 per gallon as of Wednesday—approximately 41% above the national average, which recently hit a year-to-date high. Oil and crude prices surged over 6-7% on Wednesday due to geopolitical tensions.

However, March retail sales data showed growth for consecutive periods, demonstrating consumer resilience despite energy cost pressures.

Market Implications

Consumer Staples Remain Attractive: Khouw expects essential products like diapers and toilet paper to maintain steady demand regardless of geopolitical conditions, supporting consumer staples stocks.

Consumer Discretionary Showing Strength: Recent earnings results and bullish investment flows suggest the consumer discretionary sector may have been oversold, with potential recovery ahead. Investors are increasingly looking beyond Big Tech to this segment.

Alternative Strategies: Simplify Asset Management's Paisley Nardini noted their firm is deploying long-short strategies in energy, oil, and broader commodity markets as non-Big Tech investment opportunities.

Strategic Takeaway

Despite elevated energy costs creating headwinds for consumer spending power, fundamental consumer resilience—evidenced by strong retail sales data and positive earnings—suggests the consumer trade remains viable. Analysts view both defensive consumer staples and beaten-down discretionary names as compelling opportunities amid the current geopolitical and market environment.