It’s almost inexplicable why oil prices aren’t much higher. But here’s why markets are ‘resilient’ so far despite the biggest energy supply shock ever

Core Insights - The war in Iran is causing the largest energy supply shock in history, with the Strait of Hormuz, a critical chokepoint for 20% of global oil and liquefied natural gas, effectively closed [1] Group 1: Oil Price Dynamics - The U.S. benchmark oil price is nearing $100 per barrel, reflecting a 70% increase since the beginning of the year, while disruptions could justify prices reaching $150 per barrel or more [2] - Despite the significant disruptions, oil prices have not yet reached record highs due to various factors, including the current global oil supply situation [2] Group 2: Regional Impact - The war is severely impacting oil and gas supplies to countries like Pakistan, Bangladesh, and other Southeast Asian nations that are heavily reliant on Middle Eastern energy [3] - In the U.S., gasoline prices have risen by $1.13, over 40% from January lows, but remain significantly lower than prices in Europe [4] Group 3: Global Oil Supply and Demand - The U.S. and much of Europe are less reliant on Middle Eastern oil than in decades past, thanks to increased domestic production and a shift towards renewable energy [5] - Global emergency oil supplies are more robust now compared to the 1970s Arab oil embargo, with countries like Saudi Arabia, Iraq, and the UAE expected to reroute exports to mitigate supply disruptions [5] - Currently, only about 3% of U.S. oil consumption comes from the Middle East, the lowest level since the 1970s, with domestic production and Canadian imports dominating [6]