By Brandon Smith

The last time global energy markets witnessed a shock similar to what we might see this year was during the 1973 Arab Oil Embargo. As tensions escalated during the Yom Kippur War when the Arab Coalition launched a surprise attack against Israel, OPEC nations joined forces to cut off oil to Israeli allies including the US. This froze around 15% of oil exports to America, triggering market speculation, hording and price inflation.

The infection spread to Asian markets long dependent on the Middle East for energy resources. This slowed industrial capacity and many governments imposed rationing and price controls.

Images of long lines of cars at gas stations and people filling up extra containers remain burned into the collective memory of anyone who lived through that era. However, the real threat to the US was not supply shortages; rather, it was the prospect of a market cascade.

Stagflation coupled with supply chain vulnerabilities were exacerbated by public panic. Stock markets also plunged into recession territory in the expectation of an industrial slowdown. The embargo lasted only five months, but the damage was extensive.