Oil Hits $100: What Smart People Are Saying

Mark Zandi, chief economist at Moody’s Analytics, wrote in a thread on X on Sunday, that rising oil and gas prices tied to Middle East turmoil are likely to squeeze lower- and middle-income Americans and weigh on consumer sentiment.

“As long as the Strait of Hormuz remains impassable for tanker traffic, the higher prices will go, and the more economic damage will be wrought,” he wrote, adding that Americans could soon be paying $4 a gallon for fuel.

The disruption to the Strait of Hormuz is a larger shock to global oil supplies than the 1970s oil shocks and — if prolonged — could push oil prices much higher, Paul Krugman, Nobel-winning economist and columnist, wrote in a Substack post on Sunday.

The impact of a prolonged shutdown is nonlinear, he wrote, with longer closures doing disproportionately more damage to supply.

He said recent political developments, including President Donald Trump’s call for Iran’s “unconditional surrender” and Iran’s selection of Ayatollah Khamenei’s “hard-line” son as the new supreme leader, have likely dashed traders’ hopes of a quick diplomatic off-ramp.

Even so, Krugman cautioned it is premature to predict a global recession, saying that advanced economies are less vulnerable to oil shocks than they were in the 1970s.

Financial markets are increasingly worried about a replay of the 1970s oil shock, veteran strategist Ed Yardeni wrote.

That was when energy shortages sent prices soaring, strained economies around the world, and contributed to stagflation.

“This oil shock won’t end until ships can sail freely through the Strait,” he wrote.

He pointed to prediction market Polymarket, where bets show the chances of a recession climbing to a three-month high.

“Now we can’t rule out a bear market and even a recession. It all depends on how long the Strait will be closed, obviously,” Yardeni wrote.

This oil shipping disruption’s impact on the market is far more serious than the last “maximum disruption” during the 1956 to 1957 Suez crisis, wrote Bob McNally, the president of analysis firm Rapidan Energy, on X.

Major Gulf oil producers have started reducing oil output as they run out of storage capacity.

“This represents the largest oil supply loss in history, by a factor of two. Worse, unlike in past crises, there’s zero spare capacity available,” McNally wrote.

Jim Bianco, president and founder of Bianco Research, said that Monday could mark the biggest single-day rise in the history of crude oil futures trading, which began in the 1980s.

Writing on X, he added that while the 1970s Arab oil embargo may have seen larger single-day moves, there were no listed crude futures contracts at the time, making the current spike unprecedented in the modern futures era.

Peter Malmqvist, an IFRS accounting investigator at the Swedish Financial Reporting Supervision Council, said in a LinkedIn post on Sunday that inflation could rise by a full percentage point as oil climbs above $100 a barrel.

This will likely pressure central banks to raise rates, which in turn could increase the risk of a significant global stock market correction, he wrote.

The longer oil fails to move through the Strait of Hormuz, the more prices are likely to rise, wrote Warren Patterson, the head of commodities strategy at ING.

“Even if flows through the Strait of Hormuz start to resume, it will take time for upstream production to ramp up,” Patterson wrote.

He added that production shut-ins and a lack of de-escalation in the war are forcing markets to aggressively price in the risk of a prolonged supply disruption.

Peter Schiff, chief economist and global strategist at Euro Pacific Asset Management, wrote in an X post on Monday, that soaring oil prices won’t cause inflation but could trigger a recession.

“Soaring oil prices won’t cause higher inflation. They will cause a recession. It’s the fiscal and monetary policies that will follow soaring oil prices that will cause higher inflation,” Schiff wrote.

Schiff suggested that any renewed inflation surge would likely stem from how governments and central banks respond to the economic slowdown, rather than from higher energy costs alone.

The markets are in “full panic mode,” but Robin Brooks, a senior fellow at the Brookings Institution, said the upside from here looks limited.

“They were slow to price the de facto closure of the Strait of Hormuz, but at this point the Strait isn’t going to get any more closed. If anything, it’ll get more open, so I wouldn’t chase this spike,” wrote Brooks, a former chief foreign exchange strategist at Goldman Sachs, on X.

The fallout from the disruption in the Strait of Hormuz extends across the entire energy supply chain, wrote Felipe Elink Schuurman, the cofounder and CEO of Sparta Commodities.

Restarting the oil supply chain is complicated: Ports must reschedule shipments, production has to ramp back up, and refineries need a steady flow of crude before committing to full operations.

“Even if Hormuz reopens tomorrow, normalization takes months — not days,” Schuurman wrote in a LinkedIn post.