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― Mark Twain
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Oil Shock Is Serious & Not Done
The current oil and gas crisis triggered by the blockade of the Strait of Hormuz is "more serious than the ones in 1973, 1979 and 2022 together", Fatih Birol, the head of the International Energy Agency (IEA), told Le Figaro newspaper.
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An oil crisis, which the public's clapping seals believe will be resolved quickly, unfolds slowly. This is why the public will underestimate its impact. Even though the shutdown of the Strait of Hormuz has already cut roughly 20 million barrels per day from global supply, the effects are delayed because oil shipments take weeks to arrive at critical hubs throughout the world. Markets, prices like gasoline and other distillates, are being cushioned by cargoes that were already in transit and by large volumes of oil stored at sea, but this supply will soon dry up.
As these buffers run out, the real shortage is beginning to show in surging prices for immediate physical oil deliveries, especially in Europe and Asia. Replacing lost Middle Eastern supply is difficult, not just because of limited alternatives, but also because different types of crude produce different fuels, creating mismatches across industries like aviation, transport, and manufacturing.
At the same time, shipping constraints are worsening the crisis. Longer routes, higher insurance costs, and limited tanker availability are driving freight rates sharply higher, making it harder and more expensive to move oil globally. According to the IEA, this disruption is already larger than past oil crises, and its full impact will intensify in the coming months.
Ultimately, as inventories decline and delayed shipments catch up with reality, the crisis will spread through the entire economy. Expect a rapid decline in the Economic Activity Composite (EAC) after the cycle changes. This will be discussed further in the Economy & Stocks, Commodities & Energy, and other Reports. Watch for updates.
While leaders gesture and speak of peace even as critical infrastructure is being destroyed, the public tends to assume everything can quickly return to normal. Energy is not just another commodity; It underpins the entire global economy. Unfortunately, that foundation has been damaged in unprecedented ways. This unfolding chaos is a harsh reminder that political power struggles can inflict serious, short-term harm on economic stability. Welcome to the shit show where the invisible hand instructs with a 2x4, and the public is NOT prepared. If you believe the oil rally is over, you're in for a rude awakening in 2026.
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