Despite the closure of the Strait of Hormuz and the worsening situation in the Middle East attracting global attention, oil prices and the performance of the U.S. stock market have not fluctuated as dramatically as expected.
Currently, crude oil prices are only fluctuating around $100 per barrel. Historically, after excluding inflation, Brent crude oil reached $179 after the Iranian Islamic Revolution in 1979, peaked at $155 during the Iran-Iraq War in 1980, soared to $180 during the Arab Spring in 2011, and even spiked to $130 during the Russia-Ukraine conflict in 2022.
The U.S. stock market also seems to be relatively calm; even after the drop on Thursday, the S&amp;P 500 index is down less than 3% from its closing level before the Middle East conflict.
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<h2>The &#34;Shock Absorber&#34; of Oil Prices in Wall Street's Eyes</h2>
Why haven't oil prices skyrocketed in the face of an epic supply disruption? On March 12, Wall Street Journal columnist James Mackintosh dissected three main logics in his article.
He believes the primary reason is that the starting price of crude oil is low and inventories are ample. Before the Middle East conflict, global crude oil inventories were at a five-year high, with oil prices at only $72. Although crude oil surged nearly 40% in the nine trading days before the conflict, the absolute price remains within a controllable range due to the extremely low base.
Secondly, Wall Street is betting real money on a &#34;quick resolution.&#34; Trump's comments on the situation this Monday—&#34;The war is very much over, it's almost done&#34;—directly erased the price surge to $128 in Sunday night trading. From the futures market perspective, the increase in crude oil for December delivery is less than half of that for spot delivery. This indicates that traders expect the supply disruption to last only a few weeks, rather than months or years.
Finally, macro interventions have hedged the substantial gap. The IEA and its member countries are releasing 400 million barrels of reserves. Even if the Strait of Hormuz loses about 15 million barrels of capacity daily, this batch of reserves, although the release pace and timing are still unclear, has become an important market expectation and reason for stabilizing oil prices.
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<h2>A True &#34;Oil Crisis&#34; May Require Oil Prices to Rise Another $50</h2>
Renowned energy analyst John Kemp analyzed that although crude oil futures have risen more than a third since the conflict began, with an increase of nearly two-thirds this year, this is far from being called an &#34;oil crisis.&#34;
On one hand, historical oil crises had higher absolute prices; on the other hand, major economies have significantly reduced their reliance on oil for heating and power generation. He wrote:
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Previous oil crises were accompanied by larger price increases and occurred when major economies were far more dependent on oil than they are now, with this dependence primarily coming from heating, power generation, and transportation
Kemp estimates that crude oil futures may need to rise another $40 to $50 to trigger an economic recession comparable to historical crises. This macroeconomic buffer precisely explains why both sides of the conflict still have the confidence to continue resisting in the short term.
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Although the current rise in oil prices has not yet destroyed the core global economies, the impact between regions is extremely severe. Kemp points out that the price increase is causing greater damage to developing economies (especially in Asia), which are facing the dual risks of soaring oil prices and fuel shortages.
<h2>The Logic of Risk Aversion in the U.S. Stock Market Changes: Why Have Defensive Sectors Become Hard Hit?</h2>
Regarding the phenomenon that the U.S. stock market has not experienced significant fluctuations, Mackintosh analyzes that as the world's largest oil producer, the U.S. is naturally insulated from the direct impact of the energy crisis, allowing the U.S. stock market to avoid panic.
In addition, a strange phenomenon has emerged in the U.S. stock market: when geopolitical conflicts break out, funds typically seek refuge in defensive sectors such as consumer staples and healthcare, but this historical experience has now failed.
Since the outbreak of the Middle East conflict, U.S. energy stocks have risen as expected, while technology and software stocks have slightly declined by less than 1%; meanwhile, the traditional safe haven—healthcare ETFs have dropped by about 5%, and consumer staples ETFs have fallen by about 6%.
An unusual rotation of sectors is occurring within the U.S. stock market.
Why have defensive sectors become hard hit? Another columnist for The Wall Street Journal, David Wainer, analyzes two deep-seated reasons.
First, this is a &#34;rotation within a rotation.&#34; Before the conflict, the market was worried about the AI bubble and the high valuations of tech stocks, leading funds to flow into defensive sectors for safety in advance. When actual fighting occurs, trading in these sectors has become extremely crowded and expensive. Nick Puncer, Managing Director of investment firm Bahl &amp; Gaynor, commented: “The market's focus has shifted from concerns about white-collar workers being replaced and the doomsday of SaaS (Software as a Service) to war.” Tech stocks, which have no exposure to crude oil and are not entangled in complex global supply chains, have instead become the cleanest trades at present.
Second, defensive sectors are mired in their own structural quagmire. Consumer staples (such as Campbell Soup) are facing a double blow from private labels and GLP-1 weight loss drugs changing snacking habits; while healthcare giants (such as UnitedHealth) are caught in the gap between government cost control pressures and soaring medical costs. These issues are unrelated to geopolitical conflicts but are being amplified at this moment.
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<h2>The Real Direction of Funds</h2>
In this disrupted logic, Wainer observes that Wall Street funds are following two new indicators
First, geographic exposure determines resilience against declines. Data shows that among the top 20 resilient companies in the S&amp;P 500 healthcare and consumer sectors, an average of 72% of their revenue comes from North America; while the companies with the largest declines have a high reliance on international markets, with an average of only 59% of revenue from North America. The logic is straightforward: the more focused the business is on the U.S. market, the less it is harmed by geopolitical ripples from the Middle East (such as supply chain disruptions and high energy costs in Europe).
Second, focus on PEG (Price/Earnings to Growth ratio). Citigroup strategist Traver Davis points out that with high interest rates and geopolitical risks, investors should no longer chase absolute low valuations but should seek &#34;high growth cost-effectiveness.&#34; Companies in the pharmaceutical sector, such as AbbVie and Eli Lilly, which have real profit growth rates, continue to attract capital.
<h2>&#34;Now is not the time for blind confidence&#34;</h2>
However, both Wall Street columnists and energy analysts have issued stern warnings.
Mackintosh emphasizes that the current stability of all assets is based on the extremely fragile assumption that &#34;all parties want to quickly end the war.&#34; But outside of game theory, the emotions of revenge are difficult to quantify. In the narrow and easily blockaded Strait of Hormuz, if a few oil tankers sink, a passenger plane is shot down, or a key Saudi pipeline is directly attacked, the current optimistic pricing will be completely torn apart.
Kemp also warns that if the war continues and the Strait of Hormuz remains closed to tankers for an extended period, there is still a possibility of oil prices spiraling out of control, which will truly test the resolve of the conflicting parties to maintain hostilities.
As the article states: &#34;Now is not the time for blind confidence in the outcome.&#34;

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Analysis suggests that high crude oil inventories, a decreasing reliance on oil in the global economy, and Wall Street's expectations of a "short-term conflict" have collectively suppressed oil prices; the traditional safe-haven logic in the U.S. stock market has unexpectedly failed, with defensive sectors suffering heavy losses due to crowded trading and structural headwinds, while tech stocks and domestic companies with no exposure to crude oil have become a safe haven for funds. However, analysts warn that the current stable asset pricing is extremely fragile, and if the conflict prolongs or core facilities are attacked, the market's optimistic expectations may be violently reassessed

- Despite the closure of the Strait of Hormuz and worsening Middle Eastern tensions, oil prices and US stock markets have not experienced expected volatility.  
- Current oil prices hover around $100 per barrel, significantly lower than historical crises, with various market indicators suggesting that the impact may be contained due to plentiful inventories and strategic releases.  
- Analysts warn that should hostilities persist or escalate, the stability of oil prices and markets could be seriously challenged, reiterating that optimism is fragile amid potential geopolitical events.

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The Strait of Hormuz remains closed, yet oil prices are still far below historical highs, and the US stock market has not panicked. Why is the market so stable?