Oil shocks are no longer so shocking

What the report says

The Independent Uganda published a July 18, 2026 commentary by economist Nouriel Roubini arguing that current oil-market turmoil linked to the Persian Gulf and the Strait of Hormuz has produced a more limited economic shock than the crises of the 1970s. Roubini writes that the United States and Iran remain far apart on terms for a durable reopening arrangement, leaving the region in what he calls an unstable balance, with renewed clashes still possible.

According to the commentary, markets have reacted relatively calmly despite what Roubini describes as a very large disruption to global oil supplies. He says equity markets rose on hopes of a temporary ceasefire becoming a broader deal, while the impact on growth and inflation has so far been modest compared with the stagflation, weak stocks and high bond yields associated with the 1970s oil shocks.

Roubini places the current episode in a longer history of oil being used as a geopolitical weapon, citing conflicts and crises from the world wars to Suez, the Six-Day War, Iraq’s invasion of Kuwait, the 2003 Iraq war and recent clashes involving Iran. He argues that later oil shocks have tended to be shorter and less economically damaging because producers such as Gulf states can add supply, oil use has become more efficient, strategic petroleum reserves exist, OPEC’s power has weakened, and alternatives to oil have expanded.

The analysis also says improved fiscal and monetary policy has helped prevent inflation expectations from becoming unanchored. Roubini adds that the AI investment boom is providing a positive supply-side force that may partly offset energy risks, but warns that a wider or prolonged conflict could still create more serious stagflationary pressures than markets currently anticipate.