Why this oil shock looks unlike anything since 1973

We are now into the eighth week of the war between Israel, the United States, and Iran. What began as a series of strikes has become something more consequential for the world economy: an ocean chokepoint with the U.S. Navy on the outside and the Iranian military on the inside, both refusing to let oil tankers through. On April 13th, the U.S. imposed a naval blockade on Iranian ports in the Strait of Hormuz. Five days later, on April 18th, Tehran responded by declaring its own "inner blockade" of the entire waterway.¹ The strait is now functionally closed.

I want to walk you through what this actually means for global oil, how the size of this shock compares to the great oil crises of the past, and --- importantly --- why the United States today is in a fundamentally different position than it was in 1973, 1979, or 1990. The story is not a comfortable one for global energy markets, but it is a more reassuring one for the American economy than most clients realize.

Before the war began in late February, roughly 20 million barrels of oil per day moved through the Strait of Hormuz --- about 20% of global petroleum liquids consumption and roughly one-quarter of all seaborne crude oil trade.² According to the International Energy Agency's April 2026 Oil Market Report, loadings of crude, natural gas liquids, and refined products through the strait have collapsed to around 3.8 million barrels per day. That is a decline of more than 16 million barrels per day from the February baseline.³

The price response has been swift, but more orderly than you might expect. Brent crude, the global benchmark, traded near $70 per barrel before the war and reached an intraday high near $120 in late March. As of this writing, Brent is trading around $95 to $102 per barrel.⁴ Figure 1 shows Brent's monthly average price going back four decades, with the current shock placed in historical context. We have been at higher prices before --- repeatedly --- but rarely for this kind of reason and rarely from this starting point.

For context, U.S. retail gasoline crossed $4.00 per gallon at the end of March, up roughly 30% from where it was when the war began.⁵ That is painful at the pump. It is also, by historical standards, a remarkably modest move given the scale of the supply disruption underneath it. Why prices have not gone higher is the more interesting question --- and the answer leads directly to the position of the United States in this conflict.

Figure 1: Brent Crude Oil — Monthly Average Price (1987–2026). Source: Alpha Vantage / EIA.

Every oil crisis I have studied --- and I have studied them all --- shares a similar shape. A geopolitical event removes a chunk of supply from the market, prices spike, and the world adjusts. What separates the great shocks from the manageable ones is the size of the supply hit relative to what global producers can replace.

Let's look at the historical comparisons. The 1973 Arab oil embargo, the founding event of the modern energy era, removed approximately 4.5 million barrels per day from global supply --- about 7% of world consumption at the time.⁶ The 1979 Iranian Revolution took Iranian production down by 4.8 million barrels per day, roughly the same 7% share.⁷ The 1990 Iraqi invasion of Kuwait took Iraqi and Kuwaiti production --- about 4.3 million barrels per day combined --- offline almost overnight.⁸ Russia's invasion of Ukraine in 2022 ultimately removed about 3 million barrels per day from Western markets, though much of that was rerouted to Asia rather than destroyed.⁹

By every measure I can find, the Hormuz disruption is the largest oil supply shock in history. Figure 2 compares the magnitude of disrupted barrels across the major shocks of the last fifty years. The 1973 embargo --- the event that introduced the term "oil crisis" to American vocabulary --- displaced about 4.5 million barrels per day. The current Hormuz blockade has displaced something on the order of 16 million barrels per day at peak. That is roughly three and a half times the size of the 1973 shock, and four times the size of the 1990 Gulf War disruption.

Why, then, is Brent trading around $100 instead of $200? Three reasons. First, supply from outside the immediate Gulf chokepoint has absorbed some of the lost volume --- though far from all of it. Second, governments have drawn down strategic reserves, with the United States alone authorizing the release of 172 million barrels from the Strategic Petroleum Reserve in March.¹⁰ Third, and most importantly for our story, U.S. shale production has held at record levels and stepped in to backfill global markets to a degree that simply was not possible in any previous crisis.

Figure 2: Magnitude of Global Oil Supply Disruptions (Million Barrels per Day). Source: EIA, IEA, Federal Reserve History, Dallas Fed.

Here is where the comparison with past oil shocks turns sharply in America's favor. In 1973, the United States imported roughly 35% of the oil it consumed.¹¹ By 1979, that figure had grown to about 43%. We were structurally exposed --- when the Saudis cut, our gas stations had no gasoline. The economic cost was severe: gas lines, rationing, "WIN" buttons, and ultimately a recession.

Today, the picture is unrecognizable. U.S. crude oil production hit a record 13.6 million barrels per day in 2025, an all-time high.¹² The Energy Information Administration projects 2026 production will average 13.5 million barrels per day, near that record. Figure 3 shows U.S. crude oil production from 1970 through today. The chart speaks for itself: from a peak of around 10 million barrels per day in 1970, U.S. production fell to roughly 5 million barrels per day by 2008. Then the shale revolution arrived. Production has nearly tripled since 2008, growing 165% over the last seventeen years.¹³

For reference, that production gain alone --- the 8.6 million additional barrels per day America produces today versus 2008 --- is nearly twice the size of the entire 1973 oil embargo.

The trade balance tells a similar story. In 2024, the United States exported a record 10.8 million barrels per day of crude oil and petroleum products against 8.4 million barrels per day of imports, making the country a net petroleum exporter for the third consecutive year.¹⁴ Figure 4 illustrates the U.S. position then versus now in starker terms: in 1973 we were a desperate buyer; today we are one of the world's largest sellers.

Figure 3: U.S. Crude Oil Production, 1970–2026 (Million Barrels per Day). Source: EIA Short-Term Energy Outlook.

Figure 4: U.S. Net Petroleum Imports as a Share of Consumption. Source: U.S. Energy Information Administration.

When clients ask me whether war is good for stocks, my honest answer is "it depends on which war and which stocks." This particular war, with this particular blockade, creates a set of unusual cross-currents that favor the U.S. economy in ways most past shocks did not.

Consider the asymmetry. American consumers pay roughly 30% more at the pump --- a real burden, particularly on lower-income households. But American oil and gas producers, refiners, LNG exporters, and the entire ecosystem of pipeline, midstream, and oilfield services companies are seeing some of the strongest revenue conditions in over a decade. The Permian Basin alone accounts for 48% of total U.S. crude oil production,¹⁵ and producers there --- like operators across the major U.S. basins --- are receiving prices well above the levels at which most wells generate strong free cash flow. The economics for American producers at these price levels are highly favorable.

Beyond direct producer profits, there is a second-order benefit that may matter more in the long run. About 20% of the world's LNG trade moves through the Strait of Hormuz, and roughly 83% of those cargoes are bound for Asian markets.¹⁶ That means China, Japan, South Korea, and Taiwan disproportionately bear the cost of the disruption --- and they are the buyers now looking hardest for alternative sources of liquefied natural gas. The United States has spent the better part of a decade building out Gulf Coast LNG export capacity. That investment looks very different today than it did a year ago.

There is also a financial dimension worth thinking about. When global investors are weighing energy security and geopolitical risk, the relative attractiveness of the U.S. dollar and U.S. capital markets matters. The dollar today is the world's reserve currency, sitting on top of the deepest capital markets on the planet. That status is a structural cushion that did not exist for the U.S. in 1973, when the dollar had just been cut loose from gold and was widely seen as weak.

The takeaway: the United States in 2026 sits on the producer side of an oil shock for the first time in modern history. We are not immune to the pain --- gasoline costs more, supply chains are stressed, and inflation expectations have ticked up. But we are no longer the helpless price-taker that we were when Henry Kissinger was negotiating with King Faisal.

We are watching three things carefully. First, whether the blockade evolves into a kinetic exchange beyond the strait --- attacks on Saudi infrastructure, Iraqi production, or U.S. naval assets would shift the calculus immediately. Second, whether reduced Asian oil imports trigger a broader demand shock that ripples back to global growth and corporate earnings. Third, whether long-term inflation expectations begin to drift higher in market-based measures, which would change the bond math materially.

A year can make a big difference. So can six weeks. The world looks different than it did at the end of February, before the first strikes, but the principles that have served clients well over decades have not changed.

I will close with a perspective I think is worth holding onto. For fifty years, every American president has worried about what would happen if the Strait of Hormuz closed. We are now living through the answer, and while the answer is not pleasant, it is not catastrophic for the United States. The shale revolution, the LNG buildout, and the long, expensive process of rebuilding domestic energy infrastructure have given this country an option it never had before: the option to absorb a Hormuz-scale oil shock and keep functioning.

That is not a partisan statement. It is a structural one. And it is the reason I am more measured about this crisis than the headlines might suggest you should be.

Our team will continue monitoring conditions closely and will be in touch as the situation evolves. As always, please reach out if you would like to discuss your portfolio specifically.

All my best,

Brandon VanLandingham, CFA, CMT, CFP

 

 

 

 

 

 

 

 

 

 

1. CNN, "Day 50 of Middle East conflict --- Iran says it's closing Strait of Hormuz again," April 18, 2026; Al Jazeera, "What to know about US-Iran standoff over the Strait of Hormuz," April 19, 2026. 2. U.S. Energy Information Administration, "Amid regional conflict, the Strait of Hormuz remains critical oil chokepoint," and "The Strait of Hormuz is the world's most important oil transit chokepoint," 2025. 3. International Energy Agency, "Oil Market Report --- April 2026." 4. CNBC, "Oil prices jump after Iran and U.S. attack commercial ships as tensions escalate over Strait of Hormuz," April 19, 2026; Axios, "Oil prices jump after US seizes Iran ship, Strait of Hormuz setbacks," April 19, 2026. 5. Wikipedia, "2026 Iran war fuel crisis," accessed April 22, 2026; PBS NewsHour, "Oil prices spike again following latest standoff in the Strait of Hormuz," April 2026. 6. Federal Reserve History, "Oil Shock of 1973-74"; Center for Strategic and International Studies, "The Arab Oil Embargo --- 40 Years Later." 7. Federal Reserve History, "Oil Shock of 1978-79"; Brookings Institution, "What Iran's 1979 revolution meant for US and global oil markets." 8. Wikipedia, "1990 oil price shock"; U.S. Energy Information Administration, "Effects of crude oil supply disruptions: how long can they last?" 9. Federal Reserve Bank of Dallas, "The Russian oil supply shock of 2022," March 22, 2022; European Central Bank Economic Bulletin, 2023. 10. U.S. Department of Energy, "United States to Release 172 Million Barrels of Oil From the Strategic Petroleum Reserve," March 2026; EIA, U.S. Ending Stocks of Crude Oil in SPR. 11. U.S. Government Accountability Office, "The Potential for Diversifying Oil Imports," 1981; Council on Foreign Relations, "Oil Dependence and U.S. Foreign Policy." 12. U.S. Energy Information Administration, "U.S. crude oil production rose in 2025, setting new record," and "EIA forecasts U.S. crude oil production will decrease slightly in 2026." 13. EIA Petroleum & Other Liquids data; Wolf Street analysis of 2024 EIA petroleum trade data, March 2025. 14. EIA, "U.S. crude oil exports reached a new record in 2024"; EIA, "Imports made up 17% of U.S. energy supply in 2024, the lowest share in nearly 40 years." 15. U.S. Energy Information Administration, "U.S. crude oil production rose in 2025, setting new record" (Permian regional production share, 2025). 16. U.S. Energy Information Administration, "About one-fifth of global liquefied natural gas trade flows through the Strait of Hormuz."

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