Why today’s Iran oil shock is not a repeat of 1979
March 25, 2026
Investors have been forced to price a fresh energy supply shock as tensions in Iran flare — an episode that has many looking back to the 1970s for a familiar inflation playbook. Markets often search for a pattern by anchoring to 1979, when an oil shock fed directly into a broad and persistent surge in inflation. But today’s backdrop is different. “Put away those 1970s double inflation wave shocks – this is not 1979,” notes Garrett Melson, CFA, Portfolio Strategist at Natixis Investment Managers Solutions. “Gone are the days when stronger oil meant a weaker dollar.” The U.S. economy is far less sensitive to energy price shocks than in the past, reflecting structural changes in the energy landscape. The U.S. is now a net exporter of oil, and these shocks increasingly represent a positive terms-of-trade effect.
- Energy price shocks are real income shocks, but the direct fallout could be far more limited than in the past
- U.S. energy intensity has fallen 63% since the 1970s and another 7% since 2022
- Energy goods and services spending now represents a historically small share of consumption
Personal consumption expenditures (PCE), also known as consumer spending, is a measure of the spending on goods and services by people of the United States.
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