oil supply loss: Biggest energy crisis ever: 600 million barrels lost, oil shock sends prices, inflation and markets into turmoil
Gas prices are rising rapidly in the USA
Gas prices in the US have already risen 47% since December due to the crisis. According to the Kobeissi Letter analysis, inflation in the US is currently approaching 4%, similar to what was experienced during the crisis of the 1970s. Europe is facing an even worse situation for aviation fuel, where jet fuel prices have increased by over 100 percent. Europe currently has only 6 weeks of jet fuel left, raising fears of flight cancellations. Governments in Europe are now asking people to work from home to save fuel.
Asian oil supply risk is high
Asia has been the hardest hit region as it is heavily dependent on oil passing through the Strait of Hormuz. Approximately 45% of Asia’s oil imports come from Hormuz, making Asia extremely fragile. Asia also depends on Hormuz for 30% of its gasoline and naphtha imports, according to the Kobeissi Letter. In addition, 9 percent of diesel and 5 percent of jet fuel in Asia come from the same route. The real question now is how this crisis will affect the global economy in the long run.
Energy inflation continues to rise in the USA
Energy inflation directly accounts for about 7% of U.S. inflation, but it also indirectly affects many other costs. U.S. energy inflation recently reached an extreme rate of 287 percent on an annual basis. US overall inflation (CPI) is now at 3.3%, its highest level since February 2024. Models show inflation could exceed 3.5% as soon as next month. Consumer confidence is collapsing due to rising prices, and the University of Michigan index falls to a record low of 47.6. The global economic outlook is now changing due to this crisis.
Interest rate cuts no longer seem possible
Due to rising inflation, expectations for interest rate cuts in the USA are falling rapidly. There is now only a 22% chance of a rate cut by July; This rate was previously 90%. Markets no longer expect an interest rate cut even in 2026 as a basic scenario. Just a few months ago, investors were expecting more than 3 rate cuts this year.
The United States is currently facing “compound inflation,” meaning new inflation on top of the high inflation of previous years. Therefore, investors are rushing to buy assets such as stocks to protect their wealth. Wall Street is buying stocks at the fastest pace since 2018. In this environment, wealth inequality is also increasing rapidly.
Markets remain strong
According to Kobeissi Letter data, the wealth of the top 0.001% of U.S. households has increased by 3,500% since 1976. The top 0.01% and 0.1% gained 2200% and 1200% wealth respectively. Meanwhile, the average household only saw growth of around 200%. This means that wealthy people benefited most from the crisis. Despite global chaos, US technology and artificial intelligence companies are growing stronger. Nasdaq 100 valuation fell from 29 times to 22 times, below the 10-year average. Companies like Nvidia and Microsoft are now much cheaper than at historical valuations. In fact, they are said to be half as expensive as Walmart on a forward valuation basis.
Markets are currently extremely volatile and full of constant disruptions. However, this volatility also creates great opportunities for investors. The idea of “own your presence or be left behind” is becoming increasingly popular. This is one of the reasons why the S&P 500 added $7.3 trillion in just 14 trading days, as The Kobeissi Letter reports. The U.S. economy is becoming “K-shaped,” where the rich get richer and others struggle.
FAQ
Q1. Why is there a global energy crisis right now?
The crisis occurs because a major war has cut off large amounts of oil supplies from the global market.
Q2. How does the energy crisis affect people and the economy?
It increases fuel prices, pushes inflation up, and makes daily life and travel expensive.
