Key insights
- The article discusses the market's seemingly contradictory reactions to US and Iranian actions affecting oil supply. While Iran's actions led to market declines, the US blockade has been met with stability. This suggests market perception of geopolitical risk and control matters more than the actual supply constraint. The US action may be perceived as more stable and less likely to escalate, hence the muted negative reaction.
Markets reacted very severely when the Iranians effectively closed Hormuz in the middle of march, suggesting high oil prices are very negative for stocks.
Yet after the US implemented what appears to be an indefinite blockade, oil prices seem to have stabilized and stocks have taken off to new highs. The US has constrained middle eastern oil supply just as the Iranians had. Why do stocks and oil seem so receptive to America’s blockade but have a complete opposite reaction to the Iranian closure of the strait?