The West hasn't felt the true impact yet. This is a global crisis, not just Western. Highlights physical shortages globally (India, fishing boats). The Strait of Hormuz blockage is unprecedented, stopping 22M bpd of oil & LNG. Global production is down ~11M bpd; forecast loss of 900M barrels from Middle East in 2024, comparable to COVID demand shock (~870M barrels). Market remains complacent on near and long-term impact.

Contrasts the current supply shock magnitude to the COVID demand shock for perspective.

Safety buffers (Russian/Iranian barrels, SPR) are being used up. When physical shortages hit, the paper and physical markets will converge. If the Strait doesn't open, demand destruction kicks in when oil spending reaches ~5.5% of global GDP. That equates to about $177 per barrel today.

Explains the path from buffer depletion to physical shortage, and cites historical demand destruction threshold (5.5% of GDP) to derive the $177 target.

Don't buy energy stocks on a geopolitical spike; focus on 'the day after' the Strait opens. Pre-crisis, a historic glut was expected by 2026; that's gone. Inventories approaching multi-year lows. A permanent $10-20 political risk premium will be introduced. OPEC spare capacity (much behind the Strait) can be impeded by cheap drones. There's risk of permanent production loss (e.g., Iraq reservoir damage). The idea that oil falls back to $60 is naive; there is a 'new normal'.

Details three structural impacts: vanished glut forecast, enduring political risk premium, and potential permanent production damage, leading to a higher equilibrium price.

Iran has weaponized energy, making the world's most critical chokepoint much riskier. This justifies the $10-20 permanent risk premium. This elevates the value of long-dated reserves in politically secure jurisdictions (like Canada).

Connects the geopolitical shift to the risk premium and its investment implications for secure resource holders.