#energy-supply-shock

#energy-supply-shock

The energy shock from the Iran war pushed consumer prices to their highest level in nearly two years, with the Consumer Price Index rising 3.3 percent from a year earlier.

Roughly 20 million barrels per day of oil moved through Hormuz in 2024, equivalent to about one-fifth of global petroleum liquids consumption. When that waterway closed, oil prices spiked to $126 per barrel in what the U.S. Energy Information Administration has described as the largest supply disruption in global oil market history.

China's stockpiling surged in 2025 due to relatively low oil prices tied to softer demand, rising geopolitical risks, and a new domestic energy law requiring more reserves.

Traders are simultaneously pricing in two contradictory scenarios: continued political de-escalation on one hand, and the possibility of renewed escalation on the other. This fragile balance leaves the market vulnerable to sudden movements, especially given oil prices' high sensitivity to geopolitical developments in the Middle East.

Major indices, including the Nasdaq Composite, S&P 500, and Dow Jones Industrial Average, all recorded gains, with the Nasdaq delivering its strongest weekly performance since November.

There's no doubt that what's happening now is an order of magnitude bigger - in terms of potential fallout for oil markets - than Russia's invasion of Ukraine. The global benchmark Brent crude is trading around $88 Friday morning, up roughly $16 since military strikes against Iran began.

Shipping costs have increased by more than 10 percent in the past month due to the US-Israel war on Iran. The 60-day waiver for the Jones Act aimed to lower energy costs but has had little impact on oil prices, which continue to rise amid the ongoing conflict.

It may be too late for Trump to negotiate from a position of strength with Iran. The conflict has raised the risk of a worldwide recession.