This round of the energy shock is weaker than in 2022, and even less comparable to the 1970s

Overview

The report focuses on the recent energy price shock and the rebound in risk assets, rebutting the view that the current situation is directly comparable to the post-Russia-Ukraine energy crisis of 2022, let alone the oil crisis of the 1970s. The author argues that while volatility and caution remain necessary, the current energy shock has not yet reached multiple thresholds seen in historically severe shocks, so the resilience of risk assets such as equities and high yield credit has a fundamental basis.

Core views

The core view is that the current energy shock is a milder version of past shocks. First, both spot and futures prices for oil and gas are below those seen at the same point in 2022, and investors are not pricing a persistent stagflation shock. Second, after adjusting for inflation and lower energy intensity, the same nominal oil price delivers a smaller economic shock. Third, the lower inflation starting point means central banks do not need to pivot rapidly to aggressive rate hikes as they did in 2022. Fourth, the limited but crucial macro data available still points to expansion, whereas severe oil price shocks such as those in 1973 and 1990 were often quickly followed by deterioration in employment or unemployment data.

Analysis framework

The report uses historical comparison and cross-asset observation, comparing the 2026 energy shock with the period after the Russia-Ukraine conflict in 2022, the first oil crisis in 1973, the Gulf War in 1990, and other energy crisis episodes. The analysis focuses on Brent crude, real WTI prices, European natural gas futures, US and European high yield credit spreads, inflation levels, central bank policy expectations, US employment data, European PMI, and changes in energy intensity.

Methodology notes

• Macro historical comparisonComparison of energy shock severity thresholds

  Use price levels, futures expectations, the inflation backdrop, energy intensity, and macro data to judge whether an energy shock has reached the level of a historical crisis.

  The report argues that one cannot look only at the direction of oil prices, but should instead assess nominal and real energy prices, market pricing of persistent shocks, the economy’s dependence on energy, central bank reaction functions, and whether macro data weakens immediately after the shock.

• Cross-asset market validationRisk asset resilience test

  Use the rebound in equities and the performance of high yield credit spreads to verify whether the market is pricing a severe stagflation shock.

  The report notes that the S&P 500 posted three consecutive weekly gains of more than 3%, and US and European high yield credit spreads have narrowed versus the start of the conflict, consistent with the view that the current shock has not reached the severity of 2022.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Risk assets

  Generally benefit from the view that the energy shock is below historically severe thresholds

  Strengths

  The recent rebound has a macro foundation, and the market is not pricing a persistent stagflation shock.

  Weaknesses

  If energy prices rise sharply again, valuations and risk appetite could still come under pressure.

  Comparison

  Unlike the renewed sharp decline after the early-2022 rebound, the current shock is milder in terms of oil and gas prices and the policy backdrop.

  Risks

  Escalation of the conflict, disruption to oil and gas supply, renewed rise in inflation expectations.

• US and European high yield credit

  Spread tightening reflects risk appetite and resilient growth

  Strengths

  US and European HY spreads are already narrower than at the start of the conflict, indicating that the market is not pricing a deep recession scenario.

  Weaknesses

  High yield credit is sensitive to slower growth and tighter financing conditions.

  Comparison

  Spreads widened noticeably after a brief improvement in early 2022, whereas the 2026 path has so far been more stable.

  Risks

  If macro data weakens or central banks turn hawkish, spreads could widen again.

• Crude oil

  Core variable of the energy shock

  Strengths

  Current Brent and real WTI prices are below levels seen in historically severe shocks, and the futures curve does not indicate a long-lasting shock.

  Weaknesses

  Geopolitical events could quickly push up the risk premium.

  Comparison

  Brent stayed above $100/bbl for a long period in 2022, whereas current 6-month futures are below $80/bbl.

  Risks

  Supply disruptions, transport route risks, spillover from the conflict.

• European natural gas

  One of the energy variables showing the greatest difference versus 2022

  Strengths

  Front-end and 6-month futures prices are far below their 2022 peaks, easing stagflation pressure in Europe.

  Weaknesses

  Europe remains sensitive to gas supply and seasonal demand.

  Comparison

  The gas shock in 2022 was extremely severe, whereas current prices are only a fraction of those levels.

  Risks

  Supply tightness, falling inventories, rising winter demand.

• Rates and central bank policy expectations

  A lower inflation starting point reduces the risk of being forced into sharp rate hikes

  Strengths

  Inflation is close to target, and the Fed dot plot still implies rate cuts rather than significant hikes.

  Weaknesses

  If energy prices re-accelerate inflation, policy expectations could reverse.

  Comparison

  Before the 2022 shock, central banks had already begun a hawkish pivot; policy pressure is lower now.

  Risks

  Inflation rebound, rising inflation expectations, hawkish central bank communication.

Key data

• Brent 6-month futuresBelow $80/bblAt a similar stage after the Russia-Ukraine conflict in 2022, 6-month futures had pointed to above $100/bbl.
• Duration of Brent at elevated levels in 2022About 5 months at no less than $100/bblThe report uses this to show that the 2022 energy shock was more persistent.
• Cumulative inflation since 2022At least about 10% in the US and euro areaThe same nominal oil price now implies a lower real shock.
• Change in US energy intensityDown 6% in 2025 versus 2022Lower energy intensity means less energy is required per unit of GDP.
• US PCE inflation in February 20262.8%Below the roughly 6% inflation backdrop at the start of 2022.
• Euro area CPI in February 20261.9%Close to target levels, reducing pressure on central banks to respond hawkishly.
• US employment in MarchLargest nonfarm payroll gain in 15 months, unemployment rate declinedThe report uses this to show that macro data remains resilient.
• US nonfarm payrolls in August 1990-208kAt the start of the Gulf War, US nonfarm payrolls recorded the biggest contraction in 7 years, serving as a comparison for a severe shock.

Impact & implications

For markets, the implication of the report is that the current rebound in risk assets should not be simply interpreted as complacency. Because oil and gas prices, inflation pressure, policy constraints, and growth data have not shown deterioration on the scale of 2022 or historical oil crises, the resilience of equities and high yield credit has a reasonable explanation. However, the report also stresses that the conflict still brings volatility, and if energy prices rise significantly, inflation becomes unanchored again, or macro data weakens, the market narrative could shift back toward stagflation risk.

Risks

• If energy prices, especially crude oil or European natural gas, continue to rise, the current assessment of a mild shock may become invalid.
• An escalation of the conflict or supply chain disruption could cause the market to reprice stagflation risk.
• If inflation rises again from levels close to target, central banks may be forced into a more hawkish stance.
• Current macro data is still based on a limited sample, and if subsequent employment, PMI, or consumption data weakens, the resilience of risk assets could be challenged.
• After the market’s consecutive rebound, it is more sensitive to negative news, and high yield credit and equities may face valuation pullbacks.

What to watch

• Whether Brent spot and 6-month futures move back toward or above $100/bbl.
• Whether front-end and 6-month futures for European natural gas show a sustained rise similar to 2022.
• Whether US PCE, euro area CPI, and inflation expectations heat up again due to a rebound in energy prices.
• Whether policy signals from the Fed and the ECB shift from rate cuts or wait-and-see toward hawkishness.
• Whether US nonfarm payrolls, the unemployment rate, and European PMI remain in expansion, or instead show rapid deterioration similar to after the 1973 or 1990 shocks.
• Whether US and European high yield credit spreads continue to narrow or widen again.