Why $100 oil is no longer spooking equity markets
Global equity markets have remained resilient despite oil prices rising above $120 a barrel due to the Iran conflict, as the economic impact of high oil prices has diminished over time. Adjusted for inflation and lower oil intensity in the global economy, $100 oil today has a much smaller relative impact than in past decades. Structural changes, including U.S. energy self-sufficiency and a shift toward services, have reduced vulnerability to oil shocks.
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ShareSave for laterPlease log in to bookmark this story.Log InCreate Free AccountWhy have global equity markets been so resilient to the Iran oil shock? Because US$100 a barrel oil doesn’t mean what it used to.Brent crude has risen around 70 per cent since the Iran war began on February 28 to over US$120 per barrel, as of early Thursday. Yet global equity markets, though volatile, are still substantially back above pre-war levels. While there are many explanations, the key one is rooted in math.The head of the International Energy Agency, Fatih Birol, has described the current oil shock as the worst-ever - more serious than the ones in 1973, 1979 or 2022.He points out that the war and closure of the Strait of Hormuz have disrupted some 12 million barrels per day (bpd) of crude oil supply.
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