The focus on a 1970s-style oil shock is dangerously narrow. The real risk is a cascading supply chain crisis, where a conflict doesn't just disrupt oil tankers but severs the arteries of all global trade. The indicator to watch isn't the price of crude, but the soaring cost of maritime war-risk insurance. That’s the story the markets are just starting to notice.
The war in Iran has triggered supply disruptions and nervous markets, sparking comparisons to the 1970s oil crises that drove many economies into stagflation. This focus on a 1970s-style oil shock, however, is dangerously narrow. The more significant risk is a cascading supply chain crisis, where the conflict threatens not just oil tankers but the entirety of global trade. The disruption has the potential to sever commercial arteries far beyond the energy sector.
While observers track oil prices, the more telling indicator of this broader risk is the soaring cost of maritime war-risk insurance. This metric reflects the escalating danger to all commercial shipping in the region, a story the markets are just beginning to notice. How these insurance costs evolve will provide a more accurate gauge of the true potential for widespread economic disruption than the price of crude alone.
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