Joaquín Kritz Lara, Chief Economist and Strategist with Numera Analytics, opened by noting that each year he focuses on a specific macro theme — tariffs the year prior, geopolitical risk the year before that. This year, he said, the answer was obvious: the conflict in the Middle East and its economic consequences, approached through two lenses — what it means for oil and gas markets, and how the broader economic fallout maps against the closest historical comparable, the stagflation episodes of the 1970s.
On oil, Kritz Lara said the current situation is the worst energy crisis on record. He walked through the evolution of global oil production during previous major disruptions — the OPEC embargo during the Yom Kippur War in 1973-74, the Iran Revolution in 1979, the Gulf War in 1990, and the Russia-Ukraine war — before turning to the present. The current supply shortfall, depending on the estimates used, is running between 12 and 14 percent of global production. The only remotely comparable instance was the OPEC embargo of 1973, and even then it took close to two years for production to drop 10 percent. From a demand destruction perspective, he said, the current situation is comparable to COVID — and by his measure worse.
Given the scale of the disruption, the relatively modest rise in oil prices has surprised many observers. In 1973, crude prices rose 250 percent. During the Gulf War, by comparison a modest crisis, prices rose roughly 150 percent in a couple of months. The current increase is approximately 50 percent since late February. Kritz Lara walked through a modelling exercise that decomposed the drivers of that price move — demand-side forces, US dollar movements, physical supply disruptions, inventory changes, and trader sentiment. The supply shortfall alone has pushed prices up more than 30 percent, a historically large impact for a two-month period. Some of that has been partially offset by early-stage demand destruction, visible mainly in jet fuel — the most discretionary refined product — while diesel, which is far harder to substitute away from, remains highly inelastic.
The more striking finding was on trader sentiment. Speculative net long positioning on WTI and Brent has pushed prices up only around 16 percent — a fraction of what was seen during the Gulf War, when trader sentiment alone drove prices up an estimated 110 percent. The reason is straightforward: going aggressively long on oil when the White House can reverse course or signal a ceasefire at any moment is a losing proposition, and hedge fund performance in March reflected that dynamic badly. Commercial buyers have also held back from stocking up on oil futures given elevated prices. The result is a market where price is rising far less than the underlying physical reality would suggest.
Part of what has buffered the market to date is that the net shortfall from the Hormuz closure was initially smaller than the headline figure implied. Of the roughly 20 million barrels of oil and refined products that normally transit the strait — approximately 20 percent of global petroleum supply — exports from Iran of around 1.5 million barrels were still flowing before the US imposed a double blockade, some rerouting was occurring through Saudi Arabia’s East-West Pipeline and UAE redirect capacity, neutral ships including Iraqi vessels were being allowed to cross, and SPR releases were underway. The double blockade has since tightened the situation considerably. With the ceasefire described that morning as being on life support, Kritz Lara said inventory drawdowns will now accelerate sharply. The US Energy Information Agency is projecting commercial OECD inventories to drop roughly five percent per month between now and July or August — a decline that will tighten both crude and refined product markets, with crack spreads for diesel already rising.
On the outlook for Brent, Kritz Lara presented a probability forecast covering the full range of potential outcomes. The likelihood that oil prices remain above $100 per barrel one year from now is quite low — roughly a three in four chance that prices will trade below that level by May of next year. A reversal to pre-war levels, however, also remains unlikely in the near term. His baseline points to a broadly balanced market over the next 12 months, with prices in the mid-$80s range, reflecting the UAE’s exit from OPEC and its ability to bring roughly 1.5 million barrels per day of surplus capacity to market quickly, continued rapid supply growth from US shale and South American producers including Brazil, Guyana, and Argentina, and above-average demand conditions during the inventory rebuild period following any reopening.
Turning to natural gas, Kritz Lara described a market defined by stark regional divergence. LNG flows account for roughly 20 percent of global supply, and the Hormuz closure has driven prices in Asia and Europe up approximately 50 percent since the start of the war. In the US, however, Henry Hub is trading 40 percent below its December level. The explanation is not trader sentiment but physical capacity: US LNG export facilities are running at approximately 98 percent utilization, leaving no room to redirect the domestic surplus to international markets despite the enormous price differential. Simultaneously, a mild winter has kept residential demand weak and inventories in days of supply at elevated levels, pushing domestic prices down. His baseline projection points to a gradual increase in US gas prices as planned LNG export capacity additions outpace production growth and tighten the domestic supply balance, though he noted gas is among the most difficult commodities to forecast accurately.
On the broader economic fallout, Kritz Lara addressed the central fear directly: will the energy shock trigger stagflation — the simultaneous rise of inflation and unemployment that characterized the 1970s crises? Several factors limit the downside risk relative to that period. The US is now fully energy self-sufficient, which was not the case in the 1970s. The world has become significantly more energy efficient — fuel economy has roughly doubled since that era — and the broad shift in global production away from goods toward less energy-intensive services provides additional insulation. In China and other major Asian economies, coal and renewables dominate the energy mix, with petroleum products representing only around 19 percent of Chinese energy consumption compared to roughly 40 percent across the G7, meaningfully limiting China’s growth exposure to the oil shock relative to what the headline import reliance figures might suggest.
The most important cushion for the US economy specifically is the AI investment boom. IT hardware, software, and data centre construction grew at an annualized rate of 33 percent in the first quarter of 2026 — a category representing approximately 5.5 percent of GDP that contributed 70 percent of the economy’s total growth rate in Q1. Strip it out, Kritz Lara said, and GDP would have grown half a percent annualized. To the extent that hyperscaler capital expenditure guidance holds, that cushion remains in place. His GDP forecast for the developed world puts the likelihood of growth exceeding two percent at roughly one in three, but the probability of severely adverse outcomes — growth below one percent — at below 20 percent. The war, in his framing, delays what was shaping up to be a solid year for global growth rather than derailing it.
The political dimension of energy prices also featured in his analysis. There is, he noted, a historically tight inverse relationship between gasoline prices and presidential approval ratings — and a similarly tight relationship in Europe between diesel prices and consumer confidence, given that European consumers rely on diesel far more heavily than their American counterparts. Betting odds on Republican victories in both the Senate and House midterms have dropped markedly since the start of the conflict, a pattern consistent with that historical relationship. The longer the strait remains closed and refined product prices stay elevated, the greater the political cost to the administration — and the greater the pressure, in his assessment, to agree to at least a temporary opening.
On inflation, Kritz Lara was more cautious. Energy prices feed directly into CPI, supply chain disruptions are building — less severe than 2021-22 but real — and corporate selling price expectations in the eurozone have ticked up sharply since March, historically a reliable leading indicator of inflation with roughly a quarter lag. The key distinction from the 2021-22 episode, however, is the labour market. Job openings relative to job seekers are below pre-COVID levels, wage growth is decelerating, and unlike the overheated economy of that period, there is no excess demand for labour today. That dynamic will temper the pass-through from energy prices into core inflation, keeping the misery index — his composite of inflation and unemployment — well below the levels seen in the 1970s. His overall framing was one of cautious optimism, with the significant caveat that a prolonged conflict driving oil toward $200 per barrel would require a fundamental reassessment.
Drafted with the assistance of digital tools to streamline the process.