One question should be troubling every investor right now: why isn’t oil trading at $90 a barrel?
Commercial vessels have reportedly come under attack in the Strait of Hormuz, the world’s most important oil transit route. Around one-fifth of global oil consumption passes through this narrow waterway, making it one of the most strategically significant chokepoints on the planet. Yet remains close to $73 a barrel.
To me, that’s a sign markets are too comfortable.
Investors appear convinced the latest escalation will remain contained and that diplomacy will ultimately prevent a broader regional conflict. Perhaps they’re right. But markets have a habit of becoming most confident precisely when risks are becoming more difficult to measure.
The Strait of Hormuz isn’t just another geopolitical hotspot. It is the artery of the global energy market.
When commercial shipping comes under attack there, investors shouldn’t treat it as background noise. They should ask what happens if the next incident is more severe, if insurers begin charging sharply higher premiums, if tanker operators rethink routes, or if exports are disrupted even temporarily.
Oil markets don’t need a complete closure of the Strait to move dramatically. They simply need confidence in uninterrupted supply to begin fading.
That’s the part many investors seem to be overlooking.
Today’s pricing suggests markets are focused on what continues to flow rather than what could suddenly stop flowing. That distinction matters because financial markets don’t wait for supply disruptions to become obvious before repricing risk. They move when probabilities change.
History offers plenty of reminders that geopolitical crises rarely unfold in a neat, predictable sequence. The largest moves in energy markets often happen after investors have spent weeks convincing themselves the situation is under control.
It’s why I believe the current level of complacency is misplaced.
Hope that negotiations between Washington and Tehran eventually produce a lasting settlement is understandable. Hope, however, is not an investment strategy.
The absence of a major disruption today doesn’t eliminate the possibility of one tomorrow.
Investors should also resist becoming distracted by every political statement emerging from Washington or Tehran. Markets are better served by watching the physical indicators that reveal whether energy supplies are beginning to tighten.
Those indicators include tanker traffic through the Gulf, export volumes, freight rates, marine insurance premiums and refinery activity. They tell us far more about the direction of oil prices than another round of diplomatic rhetoric.
If those metrics begin deteriorating, today’s oil price could quickly look out of date.
Equally important is the broader economic backdrop.
Oil has spent much of this year under pressure as concerns about global demand weighed on prices. That has encouraged many investors to believe geopolitical risks will remain secondary. But demand and geopolitics are not competing narratives—they can collide.
A market already positioned for weaker demand can still experience a sharp repricing if supply security suddenly becomes uncertain.
I’m not predicting oil must trade at $90 a barrel. Markets are rarely that simple, and no responsible analyst should pretend otherwise.
What I am saying is that current prices appear to assign surprisingly little weight to a range of plausible outcomes that would have meaningful consequences for global energy markets.
It wouldn’t take the complete closure of the Strait of Hormuz to change sentiment. A sustained increase in operational risk, higher insurance costs, shipping delays or interruptions to exports could all tighten supply conditions enough to push crude materially higher.
This is why investors should be asking not whether the latest incident is significant, but whether markets are properly pricing the possibility that it marks the beginning of something larger.
In my view, they’re not.
Markets don’t reward complacency for long. When geopolitical risk is repriced, it usually happens faster than most investors expect.
