Blog: Are the Markets Underreacting to "the biggest energy shock in history?"

The current war in the Middle East certainly created an upswing in volatility. Stock markets have generally declined as the price of oil rose. But given that publications like The Economist and the Wall Street Journal have called this "the biggest energy supply shock in history" reactions are relatively tame compared to past events. The US stock market is down about -3.5% year-to-date, while energy dependent countries like Japan are actually up in 2026. Inflation expectations are rising and global bond yields have backed up accordingly. But there, too, the action is somewhat muted.

So what is going on?