Fears of 1970s-style stagflation arise with oil spike to $100. How big a threat is it？

With oil spiking to $100 a barrel and the job market essentially paralyzed, the threat of stagflation again is looming over the U.S. economy and financial markets.

High inflation and slow growth present a double threat, as stimulative measures such as interest rate cuts and government spending only aggravate inflation. Persistently higher prices in turn can put a damper on the labor market as well as the consumer spending that drives more than two-thirds of the U.S. economic engine.

“I have been concerned about the threat of stagflation for a long time, in part because there are so many different inflationary pressures on the economy,” CME Group chief economist Erik Norland said. “You have huge budget deficits, inflation above target="_blank" kwlink="6384064000816950219725">target, and central banks are easing policy anyway. And then you add to that $100 per barrel oil.”

Markets were rattled again Thursday over the prospect of prolonged fighting in the Middle East and a blockage of the Strait of Hormuz. , the international benchmark, briefly hit $100, while U.S. crude was up by about 8.5% at 10 a.m. ET.