Oil prices surged above US$100 after escalating conflict in the Middle East tightened supply and pushed global energy markets into fresh uncertainty.
BNN Bloomberg spoke with John Zechner, chairman and founder at J. Zechner Associates, who said oil-driven inflation pressures could delay interest rate cuts and eventually weigh on equities if elevated prices persist.
Key Takeaways
- Oil prices surged above US$100 after supply disruptions in the Middle East and production cuts from several major exporters tightened global inventories.
- Sustained oil spikes have historically coincided with major market downturns, including during the 1970s OPEC embargo, the Gulf War and Russia’s invasion of Ukraine.
- Bond markets reacted negatively to a weak U.S. payroll report as investors focused more on the inflation risk from higher energy prices.
- Higher oil prices could push back expectations for U.S. Federal Reserve rate cuts and raise the risk of stagflation if economic growth weakens.
- Investors are monitoring opportunities in technology and energy equities, including oversold software stocks and natural gas producers.
Read the full transcript below:
ANDREW: After a weekend of rising oil prices that sent crude above US$100, investors are watching closely to see how the market handles these elevated levels. We have tighter global inventories and refineries shutting down in the Middle East, leaving a very uncertain outlook, to put it mildly.
We are joined now by John Zechner, chairman and founder of J. Zechner Associates. John, thanks very much indeed for joining us. I must admit, I was amazed to wake up this morning and yesterday seeing oil above US$100.
JOHN: Yeah, Andy. In fact, I was looking at the futures last night and had them up over 20 per cent, so they pulled back a little bit. But clearly the news over the weekend was more surprising.
The ongoing bombing is continuing, obviously by the U.S. and Israel in Iran, but the whole idea that Kuwait, the UAE, Iraq and now this morning Saudi Arabia have all announced they are going to cut back on oil production because there is nothing they can do with it. They cannot ship it. It is not safe to ship it, and their storage is full, so they are going to cut back. So even tighter supply on the other side.
You mentioned maybe a release of strategic petroleum reserves. But if the U.S. is trying to lead on that one, they are in bad shape. They sort of missed the boat on refilling storage over the past two years when oil prices were weaker. They have only got 21 days. That is basically a historical low. So they cannot really add a lot to the equation on that.
The one thing I heard about this morning, Andy, which was shocking, was the idea of decommissioning or desanctioning some Russian oil production. And I thought, wow, that would be something. I guess if they really need supplies in a hurry, Russian oil is out there.
That goes back to the whole thing that the biggest winner so far in this conflict is Vladimir Putin. It has taken the eyes off what he is doing in Ukraine and given him a higher price for the oil he is selling. If he gets more of this, it will even more, and he will continue on with his battle.
There is a lot of geopolitical stuff going on right now, Andy, and markets are having a hard time absorbing it all.
What I found really interesting on Friday was that really bad employment number in the U.S. I was curious about what happened to the bond market because I thought bad economic news would be good news for bonds. But bonds actually sold off a little more. So clearly the bigger worry right now is the inflationary impact of higher oil prices versus any weakness in the labour market. And that has got to weigh on stocks at some point.
ANDREW: Yeah, we were hearing talk of stagflation last week — a weak economy with prices still rising fairly briskly.
JOHN: Yeah. Oil has caused some of the greatest pullbacks in the market. Look at the first OPEC oil embargo in the early 1970s. That was probably one of the worst bear markets of the last 60 years.
Desert Storm in the early 1990s, even though it was brief, coincided with another economic downturn and bear market in stocks — not that it was solely responsible. Even more recently, with Russia going into Ukraine, as you recall, 2022 was an awful year for both stocks and bonds.
Oil is less of an impact on the overall economy than it used to be, but it is still an impact — particularly at the gas pump, and for the U.S. in an election year.
ANDREW: We have seen selling today in the copper stocks. Maybe we could have a look at Lundin Mining, LUN, or Hudbay Minerals, HBM. Are there concerns about the economic impact of this surge in energy prices? Would you be a buyer of copper shares right now, John?
JOHN: They are on the radar screen. We had sold a lot, so I do not have a big weight in them right now, and the long-term story is still intact.
But beyond what you mentioned in the short term, the recent strength of the U.S. dollar has taken away from commodity prices a little bit. Copper inventories had built up pretty significantly too.
So for all the talk about long-term demand, in the short term the supply is there, even if there is not a lot of new supply coming on. So I have a couple on the radar screen right now, Andy, but I am not rushing out and jumping on those right now.
Obviously we have other things going on in the market too — big tech trades back and forth. That was interesting last week. It was actually the best week ever for software versus semiconductor stocks after six months of brutal moves in the other direction.
ANDREW: It is interesting. I know software stocks are still down, but if we look at a name like Salesforce, CRM, it has had quite a sharp rally off the bottom, like other software vendors.
JOHN: They really have. They got oversold and maybe just overdone. The short-term valuations are very attractive. Salesforce had decent numbers. You look at MongoDB. Adobe is coming out this week.
Constellation Software was out today and was relatively good. Some of these worries about the so-called “SaaS-pocalypse” may have been a little overextended. Markets take a narrative and run it to the end zone in one direction very quickly without thinking about it.
That creates opportunities. Software will get impacted over the long term by AI, but in some ways they have a lot of ways to enable AI within their own software and ERP systems. The stocks are really oversold on that basis. We have been picking away at some of those names, and last week they certainly acted better.
ANDREW: You have been buying some Constellation Software lately. They just reported this morning. I do not think there were any huge surprises in the numbers.
JOHN: No, there were not any surprises. We have been adding. In fact, I was on Market Call last week and actually put it as one of my top picks.
We had not been a big fan for years because the valuation — about 25 times operating cash flow for two or three per cent organic growth — was completely driven by acquisitions, which were getting more expensive. That always worried me.
Now it is a bit of a different ball game. It is trading at about half that valuation. In this sort of environment, Andy, I think it plays into their game a little bit more.
You saw in the quarter they had more than 100 per cent of their free cash flow going into acquisitions. This is good feeding time for them because there are a lot of good acquisitions out there.
Not only have software valuations come down, but a lot of their competitors for buying these assets are private equity firms, and the problems going on in private equity and private debt right now mean you may not see as much competitive buying. That really gives Constellation a good open lane.
So I like it here. The organic growth has never been great, but the acquisition strategy has worked, and now there is more in play. And for all the worries about Mark Leonard having stepped back, it sounds like he has been involved pretty directly in the recent attempt to buy Sabre down in Texas.
ANDREW: That would have been a big deal, and the market apparently was relieved they did not push ahead on that because Sabre has quite a bit of debt.
JOHN: Yeah, and they have gone more the route of buying smaller private companies with vertical market software and integrating them. That has been their game plan all along.
Going after Sabre would have been a bit of a change. I will not say they will not necessarily look at other public companies if valuations get depressed enough, but it has not been the way they built their growth over the years.
ANDREW: Thank you very much, John. Really appreciate it.
JOHN: All right, Andy.
---
This BNN Bloomberg summary and transcript of the March 9, 2026 interview with John Zechner are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
