The recent violent fluctuations in oil prices have once again reminded the market of a disturbing historical reference—the stagflation era of the 1970s.
According to news from the Wind Trading Desk, on March 9, Jim Reid, the research head at Deutsche Bank, bluntly stated in a recent report that the current trends in the global energy market bear an &#34;astonishing similarity&#34; to the macro trajectory before the second oil crisis of the 1970s.
However, Deutsche Bank emphasized that the current economic structure has undergone a qualitative change, and the resilience against inflation far exceeds that of the past, making it unlikely to easily fall into the stagflation nightmare caused by the &#34;wage-price spiral&#34; after uncontrolled inflation as seen in the 1970s. The bank stated:
<blockquote>
&#34;Clearly, whether history repeats itself entirely depends on the duration of this conflict.&#34;
</blockquote>
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<h2>Overlapping Time Cycles</h2>
In the report, Reid pointed out through charts that the global macro economy seems to be repeating historical paths.
After the first oil crisis in 1973 impacted the global economy, inflation experienced a brief retreat. However, this calm lasted only 4-5 years, and a more intense &#34;second wave shock&#34; arrived as geopolitical rifts triggered it in 1978-1979.
In 1978, political turmoil in Iran intensified, leading to frequent strikes in the oil industry and disruptions in energy supply. In early 1979, the Iranian revolution broke out, at which time Iran's oil production accounted for about 7% of the global total, plummeting from 5.5-6 million barrels per day to 1-1.5 million barrels. Although the net loss to global supply was only 4-5%, the panic mentality drove oil prices from $15 per barrel to $38 per barrel between 1979 and 1980, a staggering increase of 150%.
Alarmingly, this timing rhythm has once again &#34;synchronized&#34; today. Looking at today, it has been exactly 4-5 years since the first round of global inflation outbreak in 2021-2022.
Meanwhile, Iran has once again become the common geopolitical eye of the storm in both crises.
<h2>Today's Shock is More Rapid</h2>
If the cyclical pattern is &#34;similar in form,&#34; then the slope of the oil price increase serves as a &#34;similar in spirit&#34; warning.
Deutsche Bank emphasized that the speed of this round of oil price increases has clearly surpassed that of the past. In the past six days, oil prices surged by about 44%, with extreme peaks even reaching a 65% increase.
In comparison, during the oil price surge in 1979, the most dramatic single-month increases were in April (+13%), May (+12%), and June (+22%).
In other words, the current speed of oil price increases is significantly faster.
Although oil prices have now retreated to around $85, this is by no means coincidental. Reid bluntly stated:
<blockquote>
&#34;The most striking similarity is the sequence of shocks; in both decades, Iran was at the center of the second shock, occurring about 4 to 5 years after the first shock.&#34;
</blockquote>
This astonishing overlap in rhythm has led the market to begin to be wary: are we at the threshold of a historical cycle?
<h2>Will &#34;Stagflation&#34; Make a Comeback?</h2>
For investors worried about the &#34;nightmare of stagflation&#34; reoccurring, Deutsche Bank has provided some reassurance. The current macroeconomic fundamentals differ significantly from those of the 1970s.
First, current inflation expectations are well-anchored. In the late 1970s, inflation expectations spiraled out of control, and the second oil shock ignited the &#34;wage-price spiral,&#34; forcing central banks to adopt aggressive monetary tightening policies. Today, even after experiencing a surge in inflation in 2022-23, long-term inflation expectations remain unusually stable.
Secondly, the economic structure has changed. The energy intensity of today's economy has significantly decreased, and the degree of unionization in the labor market and the indexation of wages are much lower than in the past, which greatly reduces the risk of a repeat of the wage-price spiral seen in the 1970s. Additionally, before the shocks of the 1970s occurred, inflation was already well above target, limiting the central banks' operational space.
Despite the shadow of history, the current pricing logic in financial markets does not seem overly pessimistic.
The market has not fully priced in the risk of &#34;long-term supply disruptions.&#34; Reid noted that the current 12-month futures price for Brent crude oil remains around $75 per barrel. This reflects a general belief among investors that the current conflict is merely &#34;short-term geopolitical friction.&#34;
However, no one knows what will happen in the future.
Deutsche Bank concluded: &#34;Clearly, whether history repeats itself depends entirely on the duration of this conflict. Unfortunately, the charts from the 1970s cannot provide us with an answer. But historical experience clearly suggests that once physical supply decoupling evolves into a sustained crisis, inflationary pressures will directly test the monetary tightening limits of various countries.&#34;

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Deutsche Bank warns that the oil price trend bears "striking similarities" to the oil crises of the 1970s: both storms occurred 4-5 years after a surge in inflation, with the epicenter pointing to Iran. However, Deutsche Bank notes that current inflation expectations are stable and the economy is more resilient, making it unlikely to easily fall into the stagflation nightmare caused by the "wage-price spiral" of the 1970s

- Recent fluctuations in oil prices have drawn parallels to the stagflation era of the 1970s, according to Deutsche Bank's Jim Reid.  
- Reid indicates that while the current global energy market resembles the trajectory preceding the second oil crisis, economic structures have changed significantly, suggesting that a repeat of 1970s-style stagflation is unlikely.  
- He emphasizes that the historical cycles could depend on the duration of the current conflict, as market pricing does not completely reflect the risks of prolonged supply disruptions.

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Astonishing historical similarities! After the surge in oil prices, will the "1970s stagflation nightmare" reoccur?