By Peter Reagan
At the moment, there’s a strange disconnect between the growing disruption in the Strait of Hormuz and the fact that, for most Americans, life still feels normal.
Gas prices did surge, but they’ve stabilized during the two months since the conflict began. Store shelves are still stocked. Most people can go about their routines without feeling like anything is seriously wrong.
On the other hand, we keep being told this is a truly monumental economic shock. Economists and analysts warn that something far more significant may already be unfolding beneath the surface.
A major portion of the world’s oil supply has been disrupted for weeks. Tankers are being intercepted. Shipments are delayed or halted. And yet, the full impact hasn’t reached us – not yet.
That gap between cause and effect matters more than most people realize.
Because if history tells us anything, it’s that energy shocks rarely hit all at once. They build quietly… and then show up everywhere.
And by the time they do, it’s usually too late to prepare.
The (Dire) Strait of Hormuz
We’ve seen what happened in the past when oil supplies were constricted by just a small amount. Just in the last half century or so, analyst Andrei Jikh explains we’ve had two such incidents. (His video is worth watching, by the way.) Both episodes are likely seared into the memories of everyone who lived through them.
First, there’s the 1973 oil crisis. OPEC restricted oil sales to the West, a drop of about seven percent of the world’s oil supply for five months.
Now, that doesn’t really sound like much, does it? But then, consider the results. According to Jikh’s summary:
- Global oil prices increased by 300% for five months (and never returned to pre-embargo prices)
- U.S. GDP dropped 2.1%
- Inflation peaked at 12.3%
- Unemployment hit 9%
- The recession lasted 16 months
The fallout was a severe recession in the U.S. (and the Federal Reserve notes that the embargo “helped push most of the world’s major economies into recession.”)
Second, in the 1990 Gulf War, again, seven percent of the world’s oil supply was cut off for about two months. The result?
- Oil prices increased by 75%
- U.S. GDP dropped by 1.4%
- Inflation peaked at 6.3%
- Unemployment hit 7.8%
- The recession lasted eight months
The fallout was labeled a “mild” recession.
Now, those were both pretty unpleasant economic situations! Both give us an idea of what to expect from the ongoing conflict.
This time, though, there’s more at stake…
As Bloomberg reported back in March, some 20% of the world’s crude oil and liquid natural gas (LNG) go through the Strait of Hormuz. The current blockade is therefore three times worse than the two previous historical episodes.
Today’s blockade been going on for about eight weeks. As of today, the shooting has stopped. But both the U.S. and Iran are preventing tankers from entering or exiting.
We have no indication when that oil will start shipping again.
How will that affect oil prices long-term? History points towards serious oil price increases coming our way. Macquarie Group estimates that oil prices will hit $200 a barrel by June, but frankly, that’s just a guess.
Today, no one knows how bad the fallout will be.
The shock hasn’t hit yet
The most important thing to understand about an oil shock is also the easiest to miss: You don’t feel it right away.
Right now, everything still looks… normal. Like I said before, everything seems fine. Which might lead us to suspect that all the hand-waving over the blockade might simply be “fake news.”
Here’s the thing: We aren’t feeling the impact because the disruption is small.
It’s because the whole economy is massively complex, and slow to shift.
Oil moves first. The price at the pump we’re seeing today reflects oil conditions from about three weeks ago, according to the Federal Reserve Bank of Dallas. Not what’s happening right now.
Then shipping costs rise. Then manufacturers pay more for inputs derived from petroleum (petrochemical derivatives are used in a number of industries, including plastics, synthetic rubber, fertilizer, solvents, pharmaceuticals, lubricants and waxes). That pushes up wholesale prices. Then retailers raise prices. On top of all that, transportation costs have risen in the meantime…
By the time we see the new price on the store shelf, weeks – sometimes months – have passed.
That lag is exactly what made past energy shocks so damaging.
After the 1973 embargo, the initial disruption lasted a few months. The economic consequences lingered for years. Even the shorter 1990 shock still became a recession that outlasted the supply interruption .
Today’s disruption is larger – about three times bigger. And it’s still ongoing.
According to Bloomberg, traders already expect a “guaranteed supply loss of around 1 billion barrels.”
That’s not a temporary inconvenience. That’s a hole in the global energy supply that takes time to refill.
Even if the Strait reopened tomorrow, oil doesn’t instantly reappear at refineries, in pipelines, and on store shelves. It takes time to restart flows, reposition tankers, and rebuild inventories.
That’s why the real risk isn’t what we’re seeing now.
It’s what shows up later – after the buffer is gone, and the higher costs begin working their way through the system.
By then, the question isn’t whether prices will rise.
It’s how far – and how long they’ll stay there.
Because oil is so much more than just the price at the pump.
How oil price is embedded in the entire economy
Most people, when they talk about oil prices, only talk about the price of a gallon of gas, and I don’t want to minimize that.
And I’ve mentioned just recently about how changes in oil prices show up as price increases downstream at the grocery store, at the pharmacy, in our Walmart+ and Amazon deliveries because of increased shipping costs.
Those are real. They show up, and everyone has to deal with either less shopping or less available income in their budget to compensate for those higher prices.
I mentioned that petrochemicals are nearly everywhere in manufacturing already. If you already knew that plastics and synthetic fibers were the second most important use of crude oil, give yourself a gold star!
Here’s what almost no one is talking about, though: petroleum is used to make the “most commonly used fertilisers in agriculture” which means that, when oil prices increase, the cost of fertilizer increases which means that, downstream, that (in addition to shipping costs) drives the cost of food even higher.
Yes, food gets hit twice as hard when oil prices increase. And food is one of the few things in the world that you simply cannot skip for very long (the long-term withdrawal effects are particularly bad…).
So, if you weren’t already concerned about food prices (and many people are), you may feel stress from them in just a few months… and possibly for much longer after that depending on how long the oil restrictions continue.
What can you do?
This is the part most people skip.
It’s easier to read about rising prices and economic stress than it is to ask what it means for your own savings. But this is exactly the moment when that question matters most – before the effects fully show up.
Because once higher energy costs work their way through the system, they don’t just raise prices. They tend to create a difficult combination: slower growth, persistent inflation, and increased strain on household budgets.
That’s not a comfortable environment for savers.
Cash loses purchasing power. Expenses rise faster than expected. And many of the assumptions people make about retirement – about what things will cost, and how far their savings will go – start to shift.
I’ve seen this pattern before. Not just in history books, but in conversations with customers who thought they had planned carefully, only to find that inflation and rising costs changed the math.
So the goal here isn’t to predict exactly what happens next.
It’s to build a little resilience into your savings before those pressures fully arrive.
That usually starts with a simple idea: don’t rely on a single type of asset to carry your entire financial future.
Diversification matters most when the environment becomes uncertain – when inflation is harder to control, when growth is uneven, and when the cost of everyday life is rising faster than expected.
That’s one reason many Americans choose to hold a portion of their savings in physical precious metals.
Not because they expect a sudden windfall, and not as a short-term trade – but because precious metals have historically held their purchasing power during periods of inflation and economic stress.
If you’d like to learn more about how that works, you can start with our free 2026 Precious Metals Info Kit. It walks through the role that physical gold and silver have played during past periods of instability, and how they may fit into your savings.
And if you’re already thinking about how to take that next step, you can speak with one of our team members directly at (877) 749-7738.
Either way, the key is timing. It’s much easier to prepare for these kinds of shifts before they show up in the economy – not after.