Global Oil Volatility Not A Repeat Of 1970s Crisis — Analysts

By Zarul Effendi Razali

KUALA LUMPUR, April 23 (Bernama) -- Escalating tensions in West Asia are disrupting key shipping routes around the Strait of Hormuz and the Red Sea, fuelling volatility in global oil markets and heightening concerns over inflation, growth, and fiscal stability worldwide.

However, analysts noted that the current situation differs markedly from the oil shocks of 1973 and 1979, which were marked by severe supply disruptions and fuel shortages.

Oil prices surged by as much as 300 to 400 per cent during the 1973 Arab embargo and about 150 per cent following the 1979 Iranian Revolution, triggering fuel rationing and prolonged stagflation.

By contrast, current market tensions are distinguished by price volatility rather than physical shortages, with crude prices rising from around US$70 to US$80 per barrel to roughly US$90 to US$110.

The disruptions have driven up risk premiums, insurance costs, and freight rates, adding upward pressure on oil prices even as global supply continues to flow, analysts said.

Oil market more resilient today

Malaysia University of Science and Technology (MUST) chief academic officer Professor Emeritus Barjoyai Bardai said today’s oil market is more resilient than in the 1970s, with disruptions largely reflected in prices rather than physical shortages.

“The oil crises of the 1970s were defined by supply losses that led to rationing and long queues. Today, oil is still flowing, but at higher cost due to risk premiums,” he said.

Sunway University economics professor Dr Yeah Kim Leng said this resilience is underpinned by a more diversified global supply base.

“Unlike the 1970s when West Asian producers dominated, today’s supply comes from a broader base, including the United States, Brazil, Canada, and Guyana,” he said, noting that the United States (US) is now the world’s largest producer due to the shale oil revolution.

Strategic reserves, markets shape oil price dynamics

Yeah said strategic petroleum reserves and financial markets now play a key role in stabilising oil prices.

“Large stockpiles in major economies can be released during disruptions, while oil prices today are also influenced by futures markets and risk perceptions,” he said.

He added that the current situation does not constitute a true supply shock, but is largely driven by pricing dynamics and sentiment.

“The earlier crises were true supply collapses. Today, disruptions are more localised, and the main impact is through higher prices and inflation,” he said.

Chokepoints, logistics key to current oil risks

Yeah cautioned that a prolonged closure of the Strait of Hormuz – through which about one-fifth of global oil supply passes – could trigger a more severe crisis.

Geostrategist and senior fellow at the Nusantara Strategic Research Academy, Prof Dr Azmi Hassan, said the difference is also evident in how the crisis affects consumers.

“In the 1970s, even advanced economies experienced petrol shortages and long queues. Today, supply remains available, but prices are higher,” he said.

Meanwhile, Professor James Chin of the University of Tasmania said the current challenge is more about logistics than supply.

“There is sufficient oil globally. The issue is moving it efficiently due to disruptions at key chokepoints,” he said, adding that price increases today are less severe than in the 1970s.

On market dynamics, Yeah said the evolution from the Organisation of the Petroleum Exporting Countries (OPEC) to OPEC+ has made coordination more complex, although the group still plays a key role in influencing supply and prices.

He also highlighted the importance of US shale production as a major shock absorber.

“The shale revolution allows supply to respond more quickly to price signals, helping to cushion global markets,” he said.

However, he warned that chokepoints such as the Strait of Hormuz and the Red Sea remain critical vulnerabilities.

“Any prolonged disruption or damage to infrastructure could reduce supply and delay recovery,” he said.

Global demand reshaping oil market

Yeah said global demand patterns have shifted significantly, with China and India now driving consumption.

“China is more resilient due to diversified energy strategies, while India remains more exposed but is actively seeking alternative supply sources,” he said.

He added that vulnerability in advanced economies has declined due to lower oil intensity and more diversified energy systems, although risks remain.

“Oil shocks today are transmitted through prices, inflation, and financial markets rather than physical shortages,” he said adding that while demand may soften amid higher prices, the risk of prolonged stagflation remains lower than in the 1970s, barring a major escalation.

Impact uneven ccross Southeast Asia

In Southeast Asia, Yeah said exposure remains uneven, with import-dependent economies more vulnerable to price shocks.

“Exporters such as Malaysia still face risks due to interconnected trade and price volatility,” he said.

He cautioned that subsidies, while protecting consumers, could strain government finances if high prices persist.

“Subsidies help cushion price shocks, but prolonged high prices may require policy adjustments to maintain fiscal sustainability,” he said.

Barjoyai described the current environment as “differently dangerous”.

“The system is more resilient, but also more interconnected. The key risk is not running out of oil, but mismanaging volatility,” he said.

Overall, analysts agree that while a repeat of the 1970s oil crises is unlikely, the real challenge lies in managing volatility before it spills over into broader economic instability.

-- BERNAMA