With increasing anxiety, the stock market is looking over its shoulder at the energy markets. Oil briefly topped $126 per barrel today, and as oil trades above $125, we wonder how much these high prices will spread out to affect the consumer, corporate profits, corporate spending and government spending.

I asked John Kilduff, senior vice president of MF Global and a CNBC contributor, to share his thoughts on the outlook for energy prices.

Here are his comments:

"Energy markets continue to soar, driven by, of all things in late spring, heating oil and other distillate fuels. Distillate fuels are a family of fuels that include diesel fuel, jet fuel, and the aforementioned heating oil. Concerns about the sufficiency of diesel fuel supplies in Europe have existed, in earnest, since the beginning of the year. The winter in Europe was particularly harsh and readers will recall that the winter overstayed its welcome in the United States, as well.

"The litany of reasons for the surge in energy prices have ranged from the low value of the dollar, resulting from Federal Reserve monetary policy that is too loose given underlying economic conditions, historically low refinery operating rate in the United States, and, recently, significant crude oil output outages In Nigeria, Mexico, and the United Kingdom.

"The recent call by Goldman Sachs that lauded the role of speculative interests in the energy markets and predicted oil prices spiking to $200 per barrel certainly emboldened those interests to be even more aggressive buyers of energy commodities. Portfolio managers of all stripes had the imprimatur of Goldman Sachs to decide to invest further in energy commodities at their investment meetings this week.

"The squeeze on distillates fuels internationally is real. There is a significant call on diesel fuel from Europe and South America, where it is winter time. Chile, in particular, has been a notable buyer of significant cargoes of diesel fuels of late. U.S. exports of refined oil products hit a 17 year high last week. This is partly the result of the low dollar. The strength of currencies make U.S refined cheaper than they may appear domestically.

"We continue to maintain an upside target of $138 per barrel for crude oil. Heating may trade as high as $4.00 per gallon on the Nymex, and RBOB gasoline futures may soar to $3.50 per gallon. The economy and consumers, however, will likely pay the ultimate price. If these high prices are maintained, a recession of some magnitude is a lock. The Dallas Federal Reserve commented earlier in the week that GDP could be reduced by amounts approaching 2%."

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As Steve Liesman commented Thursday on CNBC's Closing Bell, how ironic will it be that the US economy will fall into recession due to high energy prices, after seemingly avoiding a technical recession from both the mortgage meltdown and liquidity crisis on Wall Street?

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