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But It May Not Be an Inflation Story
A major shock is forming… but the real danger isn’t the rise in oil prices.
It’s this: the market may be completely misreading the nature of this shock.
CNBC’s analysis echoes a familiar warning. The 1970s could be repeating. Surging oil prices, disrupted supply through the Strait of Hormuz, and an energy shock that could spill over into inflation, recession, and a crisis of confidence.
President Donald Trump sees it differently. He believes the hardest part is already behind us. Gasoline prices will only rise temporarily and will quickly cool once shipping routes reopen.
However, current data suggests the story is not that simple.
Oil has already surged past $100 per barrel. The average U.S. gasoline price has climbed above $4 per gallon — and even exceeded $6 in some states. Roughly 20% of global oil flows are under threat. Outside the U.S., the shock is even sharper: jet fuel prices have jumped 96%, and natural gas prices in Asia have risen 43%. Global stockpiles are steadily depleting, and according to IEA’s Fatih Birol, oil shortages could intensify sharply in the coming months.
In the traditional view, the narrative is straightforward:
Rising energy prices → returning inflation → Fed forced to tighten policy → economic slowdown.
And CNBC is right to flag this risk — if the shock drags on for a long time.
But here’s the key issue: the market may be mispricing the sequence of risks.
Because today’s context is very different from the 1970s.
The United States is no longer the oil-dependent America of the 1970s. It is now one of the world’s largest oil producers. This doesn’t eliminate the shock, but it significantly reduces America’s vulnerability.
This time, the shock is mainly about disrupted flows, not a prolonged structural shortage. If the Strait of Hormuz reopens, supply could recover faster than many expect.
More importantly, consumer behavior has changed.
When energy prices rise, consumers now react almost immediately by cutting back on spending. This creates a powerful offsetting effect: as demand weakens, inflationary pressure eases on its own.
And this is the crucial point.
Fed Chair Jerome Powell recently said he is not yet considering rate hikes. But what matters isn’t the exact wording.
It’s what he’s actually worried about.
He is no longer primarily focused on inflation.
He is increasingly concerned about growth.
He fears that the energy shock will cause consumers to pull back spending, slowing the economy before inflation has a chance to take hold again.
This creates a paradox.
The Fed always claims it reacts to incoming data.
But right now, it appears to be acting on forward-looking risks.
In other words, the Fed is starting to get ahead of the curve.
And it finds itself caught in the middle:
• If it tightens policy, it risks choking off growth.
• If it does nothing, inflation risks could return if oil prices keep climbing.
But there’s an even more important layer that many are missing: liquidity.
If growth slows, it will be very difficult for the Fed to tighten.
If the Fed cannot tighten, liquidity will not be drained aggressively from the system.
In a worse-case scenario, the Fed might even be forced to pivot back toward easing.
This completely changes how we should view the market.
This is not a classic inflation shock.
It may actually be a growth shock disguised as an inflation shock.
And that means:
Inflation may not explode first.
Instead, growth could slow down first — and only then determine the rest of the economic cycle.
CNBC is correct to highlight the risks if the shock becomes prolonged.
But in the short term, the market may be looking in the wrong direction.
The real question is not just when the conflict ends.
It’s when the Strait of Hormuz reopens — and whether the economy can withstand this shock before that happens. $CL $BZ