When you google "whistling past the graveyard" you get a screenshot of the stock market performance for the past month.

Looks like many could be siloed this summer given the increase in fuel prices across the board. That could also be a downward drag on many industries. Even if we were able to get back to where we were 2 months ago today, there would still be noticeable, non-zero impact.

Starting to spike in certain states as well: https://www.freep.com/story/news/local/michigan/2026/04/13/m...

That's just the futures price. If you wanted to buy it, you would be paying $140 plus.There is a growing divergence between futures pricing and actual real world price.

We're not seeing the true scope of just how bad things and are going to get.

There are ~9 different oil "flavors" traded in large volume in the world. The big factors are primarily API gravity [1] and sulfur content. Low sulfur content is generally better but the sulfur is extracted into necessary products (primarily fertilizer). Likewise, the API gravity favors higher gravity, which actually means lighter crude. So when you see terms like "sweet, light crude" "sweet" means "low sulfur content" and "light" is high gravity. But heavier crude still has applications like building roads.

Oil is traded on futures markets. A futures contract is standardized for the type of oil, standard amounts (typically 1000 barrels per contract) and a delivery date. This allows producers to forward sell oil and consumers to forward buy it, both of which are just hedging price risk.

The price you see publicly is the future price. What isn't public is the spot or physical price. Historically those tracked each other. They have diverged in the last 2 months by upards of $40/barrel [2]. We've seen Dubai oil trade at $180+/barrel physical and Brent is really at more like $140-150.

Nobody in the know or in the business trusts the futures prices anymore.

This can happen in what's called a market of extreme backwardation. That simply means the spot prices are higher than the future price. The market seems to believe the supplies are currently constrainted but the Strait will be reopened in the short term. This is likely overly optimistic.

On a side note we saw extreme market backwardation in the silver market in late 2025 where again the paper (future) price was a lie and refiners were buying at the supposed spot price so different circumstances to this.

The second issue is that there have been record releases from strategic reserves to try and stabilize prices [3]. Even so, stockpiles are dwindling of both crude and refined products like avgas and gasoline.

Lastly, if the Strait opened tomorrow it's likely going to take years for oil to reach pre-war price levels and a lot of the problems over the next year or more are already baked in. A whole bunch of harvests have missed being fertilized so you will likely find that tens of millions of people are going to suffer from famine regardless of what happens now.

A lot of professionals are coming to the realization that financial markets are in denial about how bad this is and are going to be (eg [4]).

[1]: https://en.wikipedia.org/wiki/API_gravity

[2]: https://www.csis.org/analysis/how-interpret-wartime-oil-pric...

[3]: https://www.iea.org/news/iea-member-countries-to-carry-out-l...

[4]: https://oilprice.com/Energy/Energy-General/Is-Reality-Finall...

If this is what winning a war looks like I hope we don't ever lose one.

The markets are definitely underestimating the impact of the Strait of Hormuz closure. I've heard a couple of different theories why, but the best one seems to be that too many traders were burned by overestimating the impact of COVID on the markets, and so now they're overcompensating by underestimating the impact of the energy sector's worst nightmare. And I don't think the markets are going to properly react to the situation until everything goes absolutely haywire.

The closure of the strait has cut off 10-20% of global crude oil supply. We're at the point in the shutdown where all of the transit before the closure has arrived, which means the effect of the supply shock is now that refineries are draining all of their inventories. That means that 10-20% of demand for refined petroleum products will have to pretty sharpish be destroyed. And while people are definitely prepared to understand the impact on things like gasoline for cars or jet fuel for planes, the reality will also include scenarios like "sorry, can't buy milk anymore because no more plastic for milk jugs." COVID-induced supply shortages broke many people; the coming oil-starved supply shortages are probably going to be at least as bad.

And the real kicker is that, even if you wave a magic wand and reopened the Strait of Hormuz tomorrow, mothballed wells and refineries will take many months to spin back up to full production, just from mothballing. And some of them have been struck as military targets, which will take years to get back to full capacity. I think around 10% of world total LNG capacity is offline until 2027 if not 2028 for that reason alone.