Market Priced for Risk, Not Disruption: Fmr. WH Advisor

Summary

• Argues the market is underpricing the current energy crisis, characterizing it as the "worst energy disruption the world has ever seen," not just a risk event.
• Highlights the scale of the physical disruption: 12 million barrels per day of oil, 20% of LNG, and 5 million barrels per day of refined products (jet fuel, diesel, gasoline) have been lost, not just at risk.
• States the market's second mistake is constantly believing the conflict is nearly over, leading to periods of euphoria (e.g., on rumors of deals) when no real negotiations are happening.
• Sees the conflict lasting at least several more weeks, with no clear plan for an end-state, as original goals like regime change appear off the table.
• Explains the disruption's ripple effects: demand destruction is already starting in low-income economies (e.g., Sri Lanka's 4-day workweek, Philippines' energy emergency) and will impact global travel (jet fuel) and goods transport (diesel, trucking).
• Notes specific supply chain impacts beyond fuel, such as a major surgical glove manufacturer reducing production due to missing inputs from the Gulf region.
• Believes the US administration has missed its window for effective policy action to lower prices; the only solution now is reopening the Strait, which requires ending the war.
• Suggests a deal to spare energy assets in the Gulf and Iran could calm markets by signaling the worst physical damage risk is over, but recent Israeli attacks show this risk remains high.