We open with a thank you to Phil Dauber for this bulleted summary in his Monday morning note as he compares the 2026 Middle East war oil shock to previous oil shocks (“Unintended Consequences,” Morning Musings 3/9/2026):
% of global supply lost at the time (using annual avg production then):
- Hormuz NOW: 20M / 100M = 20%-
- Iranian Rev 1978: 5.5M / 60M = 9.2%-
- Yom Kippur 1973: 4.5M / 56M = 8%-
- Iraq-Kuwait 1990: 4.3M / 61M = 7%-
- Iran-Iraq 1980: 4M / 60M = 6.7%-
- Russia-Ukraine 2022: 2M / 95M = 2.1%
Cumberland Advisors was formed in 1973 — the Arab oil embargo shock that year made our beginning especially memorable. My late founding partner, Sheldon “Shep” Goldberg, and I had spent a year getting ready to open an independent, fee-for-service-only investment advisory firm. We were officially approved by the SEC on June 18, 1973. (Note that, effective January 1, 2026, Cumberland became a subsidiary in the holding company of Mid Penn Bank [MPB]. David Kotok is a Strategic Advisor to the new board of Cumberland.)
That year, Egyptian president Anwar Sadat mobilized the Egyptian army to take back territory captured by Israel in the Six-Day War of 1967. Other Arab countries that bordered Israel readied. The attack came on Yom Kippur in October 1973. Israel faced what might have been a four-front existential-risk war; however, Israel and Jordan didn’t engage fiercely the way they had in previous wars. Syria and Egypt did attack. The war resulted in an oil crisis when Arab nations implemented an oil embargo on Israel’s allies, including the US.
The oil shock that resulted from the Yom Kippur War was the third largest in the history summary that Phil Dauber sent out. I’m rounding numbers for ease. Oil went from $3 a barrel to $12 a barrel on the initial war shock. It subsequently hit $30 a barrel by the end of the decade. Inflation during the 1970s ultimately crossed a 10% annualized rate of change.
Paul Volcker became Fed Chairman in 1979 and was committed to fighting rampant inflation. He raised rates dramatically and sequentially. Interest rates peaked in the double-digit levels and at the highest levels since the US Civil War.
The 1980 election brought Ronald Reagan and a Republican sweep. In 1981, the bond market began a multi-decade descent in interest rates while the inflation rate did the same. The US stock market bottomed in1982, and a long-term bull market ensued. The 1970s were very difficult years for investors. The 1980s onward have been a generational time of investor success for those who retained confidence in America and the American financial and economic system. Remember that the Dow was under 600 in November 1974 when it bottomed; no one then predicted it would be 50,000 in 2026.
The geopolitical landscape changed. Egypt and Israel subsequently reached a peace agreement. They have had periods of a “cold peace” and periods of a more open border but no additional war.
Jordan and Israel reached a peace agreement with an open border and regional protective mutual defense and commerce cooperation and tourism between them. It has lasted to today.
Syria remained a murderous, oppressive state until an eventual civil war succeeded in overthrowing the Assad regime. The Assad family now lives in Russia, protected by their old regime supporter, a certain Vladimir Putin — the same Vladimir Putin whose Russian regime is giving Iran targeting data to use against American forces. And it is Russia that is benefiting from a prolonged war and the closure of the Strait of Hormuz so it can sell its oil at a higher price.
I have no forecast as to an eventual oil price peak, when it happens, when the Strait of Hormuz reopens, or whether oil infrastructure gets destroyed. (Remember how Iraq’s Saddam Hussein, in desperation, set fire to Kuwaiti oil fields when he was retreating.)
In our Kotok Report Quick Take on March 1, I wrote that “A regional war that includes existential risks is underway. Outcomes evolve. All predictions are problematic guesses.”
On the same day, March 1, we published: “Is It a Market Correction or a Reallocation?” We thank Seeking Alpha for redistributing that missive to over 140,000 investors in their list. And we thank folks for their emails and comments.
Though I will not predict the unpredictable, I can suggest clues for investors follow:
1. Watch credit spreads of all types closely.
2. Watch volatility estimates and particularly those related to options.
3. Watch the credit default swap (CDS) pricing on the US and also other sovereign countries. (Since the war started, US CDS prices have been rising.)
4. Watch natural gas in addition to oil.
5. Watch agriculture and fertilizer.
Lastly, be nimble but stay thoughtful and not panicked or driven by every headline. As my friend Bill Kennedy, Chairman of the major OCIO firm RiskBridge Advisors, says: “We are managing risk, which is what professional advisory services are all about.” (Personal disclosure: I serve on the advisory board of RiskBridge.)
Recommended Reading:
“Straits of Hormuz” | The Money Frontier,
https://themonetaryfrontier.substack.com/p/straits-of-hormuz
“The Strait of Hormuz carries roughly 30% of global fertilizer trade, with around 3 million tons of ammonia and urea moving through the chokepoint each month. Urea prices in the U.S. reportedly jumped 17% in a single session early in the week.”
“War, Fertilizer, and Fresh Highs”| Teucrium Grains and Sugar Weekly,
https://blog.teucrium.com/teucrium-insights/2026-03-06-war-fertilizer-and-fresh-highs-3
The Blood of Abraham: Insights into the Middle East, by Jimmy Carter (originally published in 1985 with updates to the afterword in 1993 and 2007), https://www.amazon.com/Blood-Abraham-Insights-into-Middle/dp/1557288623/
“Russia has provided Iran with information that can help Tehran strike US military, AP sources say” | AP News,
https://apnews.com/article/trump-iran-russia-intelligence-35afae34198408d670941f971d383378
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