Markets underpricing oil shock risk
Investors continue to frame oil surging as a geopolitical spike rather than the beginning of a structural shift in energy risk, warns the CEO of one of the world’s largest independent financial advisory organisations.
The warning from deVere Group’s Nigel Green comes as Brent crude climbs to around $115 a barrel—up nearly 60% in March alone, the steepest monthly rise since the Gulf War—while global equities fall sharply and supply routes through the Middle East face unprecedented disruption.
He says: “Brent at $115 is being treated as a spike. The data tells a different story.
“Prices are up close to 60% in a single month, options markets are actively pricing scenarios of $150 oil, and up to 20% of global supply has been disrupted through the Strait of Hormuz. Those are not conditions associated with a short-lived shock.”
Oil markets are reacting to a combination of escalating military activity, infrastructure damage, and direct threats to one of the world’s most critical energy chokepoints. The Strait of Hormuz has seen traffic collapse and shipments stranded, with millions of barrels per day effectively removed from global supply.
He continues: “We’re looking at a potential loss of 10 to 14 million barrels per day if disruption persists, in a market where global demand sits just above 100 million barrels. That gap cannot be easily filled.
“Spare capacity is limited, and logistics are under strain. This shifts the pricing dynamic materially.”
Markets are also contending with a widening conflict footprint. Attacks have expanded beyond crude infrastructure into industrial supply chains, with aluminium prices rising sharply as Gulf production facilities are hit.
At the same time, European gas prices are climbing again, reinforcing the transmission of energy shocks into broader industrial and consumer costs.
Despite this, Nigel Green says investor positioning remains anchored to outdated assumptions.
“Markets are still conditioned by the past decade, where geopolitical risk created volatility but rarely sustained price moves,” he says. “Current conditions look closer to the 1970s in structure, where supply shocks fed directly into prolonged stagflation.”
The scale of disruption underlines the point. Oil has surged faster during this conflict than during previous major geopolitical crises, including the Iraq War and the Ukraine conflict.
At the same time, political signalling is amplifying uncertainty.
US president Donald Trump has indicated a willingness to take control of Iranian oil assets, including the key export hub at Kharg Island, while also suggesting a deal remains possible.
“This dual approach introduces policy-driven volatility into already fragile supply conditions,” explains the deVere chief executive.
“Energy markets are no longer being driven purely by supply and demand. Political intent is now a central variable. Comments about seizing assets, restricting flows, or controlling transit routes have immediate pricing implications.”
Financial markets are beginning to react, but not fully.
“Asian equities have fallen sharply, with Japan’s market among the hardest hit due to its heavy reliance on imported energy.
“Bond yields are rising as inflation expectations adjust, and currencies are responding to shifting growth and price outlooks.
“Yet broader asset allocation doesn’t yet reflect a prolonged period of elevated energy costs.
“Equity markets are signalling stress, but a lot of portfolio construction still assumes reversion in oil,” Nigel Green says. “There appears a mismatch between price action and positioning.”
The macroeconomic consequences are significant. Sustained oil prices above $100 feed directly into inflation, erode consumer purchasing power, and compress corporate margins. Energy-importing economies are particularly exposed, while industrial sectors face rising input costs across multiple fronts.
He adds: “A sustained $100-plus oil environment reshapes the outlook for inflation, interest rates, and growth.
“It increases the probability of stagflation dynamics re-emerging in parts of the global economy.
“Options markets are already reflecting this risk. Trading activity has surged in contracts betting on oil reaching $150 or higher in the coming months, indicating that some participants are beginning to price in a more prolonged disruption.”
Nigel Green concludes: “Markets are still looking for a resolution that brings prices back down quickly.
“There is no clear evidence of that.
“Investors who continue to treat this as a temporary spike risk being materially underprepared.”