Global oil production has fallen more sharply than in any oil crisis of the past 50 years, due to the blockade of the Strait of Hormuz and attacks on oil production and loading sites in the Persian Gulf region. The IEA estimates daily crude output has dropped by at least 10 million barrels since the start of the Iran War, or about 12% of global production.
Oil prices have risen less than in the 1970s oil shocks. The annual average oil price in 1974 was 250% higher than in 1973, and in 1979 a barrel of crude oil was about 125% above the previous year’s average, while this year the price is forecast to be at most 60% higher than the prior year’s average.
Energy Intensity And Economic Impact
Developed countries now use less oil per unit of output than 50 years ago, which reduces the loss of purchasing power from higher prices. In the first oil crisis, Germany’s oil bill rose by 2.5% of GDP and Japan’s by nearly 4%, while a $40 per barrel rise is projected to lift oil bills by 0.5% to 1% of GDP in four countries examined.
The outlook remains uncertain due to possible supply chain disruption and long-lasting damage to Gulf energy infrastructure. The article was produced using an AI tool and reviewed by an editor.
Looking back at the analysis of the 2025 Iran War, we learned that even a massive supply disruption didn’t trigger the catastrophic price spirals seen in the 1970s. Advanced economies have become more resilient due to lower oil intensity and the use of strategic reserves. This reshapes our approach, as the old playbook for trading oil crises may now be outdated.
In the coming weeks, this suggests that implied volatility on oil options might be structurally overpriced during geopolitical scares. The 2025 crisis saw prices rise by only 60%, far less than historical events, meaning many out-of-the-money call options expired worthless. We are currently seeing the CBOE Crude Oil Volatility Index (OVX) sitting near 35, well below its 2025 peak of over 80, indicating the market is slowly learning this lesson.
Rates And Cross Asset Positioning
The smaller-than-expected hit to GDP also has implications for interest rate derivatives. We recall that in late 2025, markets priced in aggressive central bank rate cuts that never fully materialized because the economic damage was contained. This suggests that during the next energy shock, there may be an opportunity in positioning against excessive dovish expectations in the Eurodollar or Fed Funds futures markets.
However, we must consider the warning about lasting damage to energy infrastructure, which creates a higher floor for prices. Recent reports from April 2026 indicate that several Persian Gulf loading facilities are still operating below pre-2025 capacity, keeping a risk premium in the market. This makes holding some long-dated oil futures or call options a prudent hedge against the slow pace of repairs.
Given that economies are less oil-intensive, we can look at relative value trades. In 2025, we observed that futures on consumer discretionary and technology indices recovered much faster than those tied to heavy industry or transportation. This pattern suggests that in periods of energy uncertainty, a pairs trade that is long a tech-focused index and short an industrial-focused index could perform well.
