The Credit Market Lens: An Oil Shock (Mostly) Like No Other

The current global energy supply shock, catalyzed by conflict with Iran, is deviating from historical precedents as the U.S. economy and credit markets demonstrate unexpected resilience. While WTI oil prices have surged 25% since February, investment-grade credit spreads remain flat and Treasury yields continue to rise, driven by expectations of sustained central bank rate hikes. This economic hardiness stems from a structural decline in oil intensity—the U.S. now requires half the oil per unit of GDP compared to 1991—and a massive AI investment cycle projected to exceed $1 trillion by 2027. Although crude flows from the Persian Gulf are recovering to 80-90% of pre-conflict levels and U.S. rig counts are gradually increasing, significant risks persist. Bottlenecks in refining and volatile geopolitical conditions could still shift the growth-inflation mix unfavorably, potentially exposing risk assets to delayed shocks if supply chain disruptions endure.