The Iranian crisis didn’t just rattle headlines – it pulled an unprecedented share of crude off the market. The oil supply disruption is now the largest in history, amounting to 16% of supply, depending on how you may account for the replacement barrels.¹ For context, the 1973 oil embargo disrupted 7% of supply, and the typical supply shortfall that pushes oil to the maximum price for the business cycle is just a 2% shortfall.² So, …

Why don't equites care?

The S&P 500 fell just 9% early in the conflict and has since bounced back to all-time highs.^3,4 A 10% drawdown occurs every 1.5 years since 1928, making this a very ordinary occurrence. 2026 is a midterm year; the average midterm-year drawdown is 19% – more than double what we have seen so far. But this year, first quarter earnings have come in very strong, with a 15% blended growth rate thus far.⁵ Some due to tax changes from the One Big Beautiful Bill, some due to artificial intelligence (AI) spending.⁶ So, …

Do equities react faster than commodities?

In early January 2020, reports from China of a deadly virus prompted oil prices to fall, while US equities remained unfazed. Oil fell further after the cities of Wuhan and Hubei were put in lockdown in late January. Early in February, a tourist in Milan contracted COVID, and oil fell again. Not until late February, when a Milan outbreak was declared, did equities finally see what oil saw 60 days earlier: a risk to the global economy.

In early January 2022, the Russian military buildup near Ukraine was widely reported, oil started rising, while US equities continued unfazed. In early February, President Biden took the highly unusual step of publicly declaring that Russia was preparing to invade Ukraine, and again, oil rose. In late February, Russia invaded Ukraine. And it wasn't until late March that equities finally started pricing in implications from the military action that oil had reacted to 60 days prior.

Rally at risk?

The closest allegory to today's 16% oil supply disruption is the 7% disruption in 1973, which led to a 300% rise in oil prices.¹ It isn't perfect because we also changed the value of the dollar by going off the gold standard about the same time.

We are now north of 60 days into the Middle East supply freeze, with global markets having lost ~1.2 billion barrels of oil (bbl) supply.⁷ Nearly all the tankers that left the Middle East prior to February 27 have already arrived at their destinations. A fleet of 100 empty tankers has arrived in the US Gulf for oil exports rather than from the Persian Gulf.⁸ US imports just 0.5mm barrels per day (bpd) from the Middle East – a de minimus and easily replaced amount – making the US relatively insulated from the disruption.⁹ But US oil exports have already risen from 3mm bpd to 6.4 mm bpd.¹⁰

A closer look

Markets are still digesting an energy-led shock, but the second-order effects are beginning to matter just as much as the first. The three areas where we believe price signals and policy responses can travel quickly across the complex – household demand, official-sector gold buying, and agriculture’s sensitivity to input costs and weather – each offering a different lens on how this cycle may evolve.

Consumer

With the US economy still largely consumer driven, household balance sheets and sentiment remain a key transmission channel from energy prices to broader growth. A move in gasoline from $3 to $4 per gallon lifts the typical monthly fuel bill from roughly $100 to $133 for a driver covering 10,000 miles a year in a 25-miles per gallon vehicle.⁸

The dollar amount is modest, but the psychology is not: consumers experience fuel as a quasi-tax, and it quickly crowds out discretionary spending.

April’s University of Michigan Consumer Sentiment print fell to the lowest reading in the series’ history (since 1952), underscoring how fragile confidence has become in what was billed as the “year of affordability.”⁹ For commodities, this argues for sensitivity to front-end energy moves and a wider dispersion between necessities and discretionary demand.

Gold

Gold has cooled from earlier-year extremes as markets have pushed expected rate cuts further into the future, tightening financial conditions at the margin. Yet the pullback has looked more like a reset than a reversal: central banks – key to the longer-term price signal – have used weakness to add to reserves.

China’s March purchases were the largest since January 2025.¹⁰ Central banks' gold purchases in the first quarter of the year are consistent with a 1,000-ton net purchase annual rate, despite a large decline from Turkey.¹¹ With defense and infrastructure needs keeping fiscal math challenging – and with emerging market policymakers still seeking to diversify away from policy and sanctions risk – we see continued structural support for official-sector demand, even if tactical positioning remains sensitive to rates and the dollar.

Agriculture

Agricultural markets are being underpinned by supply side pressures that sit one step removed from crude: disruption-driven constraints on fertilizer inputs – including urea and nitrogen – and higher energy-linked production costs.

Price action is starting to reflect that support, with the Bloomberg Commodity Agriculture Subindex moving back above its 50-, 100-, and 200-day moving averages – an environment that can attract trend-following commodity-trading advisors and reinforce momentum.¹¹ Weather risk adds another layer: National Oceanic and Atmospheric Administration (NOAA) has raised the probability of a strong El Niño by June 2026, a setup that has historically increased the odds of yield-impacting extremes.¹² Taken together, agriculture looks increasingly positioned to take the baton from energy later this year if supply constraints and weather volatility persist.

Investors who are weary of buying broad commodity exposure with oil at or above $100 bbl can readily find options that offer longer-dated futures with oil prices in the $70s.¹² We see few options that could meaningfully relieve the global oil shortage by October.