The Oil Crisis Nobody's Pricing In (Yet)

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The market’s having the wrong argument right now.

Everyone’s focused on whether Palantir’s valuation can survive Anthropic competition, or if Meta’s new Muse Spark model actually generates revenue, or why Alphabet’s crushing it while Cars.com bleeds. Those are real questions. But they’re happening in the background while something far more consequential unfolds: Iran has effectively closed the Strait of Hormuz, and the world’s oil infrastructure is getting punched repeatedly.

Let me spell out what’s actually happening, because the stock market hasn’t fully woken up to the physics of this yet.

When Geography Becomes Economics

Iran’s attacks on Saudi pipeline infrastructure and production facilities have slashed the kingdom’s oil output. That’s not theoretical. That’s real barrels missing from global supply right now. Meanwhile, the Strait of Hormuz—which handles roughly 21% of global petroleum trade—is no longer functioning as a free passage. According to UAE oil CEO Sultan Ahmed Al Jaber, Iran maintains effective control of access, and he’s explicitly warning that the oil supply disruption will intensify if Iran keeps that grip.

This isn’t a one-day headline. This is a structural shift in global energy architecture.

Here’s what makes it dangerous: the market has been trained to dismiss Middle East risk as “priced in.” We’ve heard Hormuz threats before. We’ve survived them. But there’s a difference between a threat and a blockade that’s actively operational. The difference between “might happen” and “is happening.”

Photo by Adriana Beckova / Pexels

Energy prices are already soaring globally. UK Prime Minister Keir Starmer is explicitly frustrated enough to say Iran and the geopolitical situation are driving his country’s energy costs up. That’s not a casual complaint—that’s a sitting PM acknowledging his constituent bills are rising because of Middle East supply disruption. When politicians start talking about energy costs in this tone, it means the pain is real and visible to regular voters.

Trump’s rhetoric about Iran “better stop” Hormuz tolls is posturing from someone who historically used energy volatility as a political cudgel. But posturing doesn’t actually reopen a strait that another country controls.

The AI Bubble Meets Reality

Now here’s where this gets interesting for equity markets.

Alphabet has been a runaway train. Up 179% since April 2021. Up 31.2% in just the past six months. The S&P 500 meanwhile? Up 60.2% since April 2021. Alphabet’s basically tripled the market’s gains. Why? Solid quarterly results and the perception that Google’s AI infrastructure is locked in place. The stock trades at $316.84 and investors treat it like it’s got a moat made of algorithms.

But here’s my read: every data center, every chip, every compute cluster that powers these AI models runs on electricity. Expensive electricity. And if you’re suddenly dealing with a genuine, not-theoretical oil supply crunch, you’re dealing with energy cost inflation that compounds across every hardware-intensive business.

Meanwhile, Palantir dropped after Michael Burry warned about rising competition from Anthropic. Anthropic’s gaining momentum. OpenAI responded by sending a shareholder memo blasting Anthropic for “operating on a meaningfully smaller curve”—which is a fancy way of saying they’re still smaller but growing faster in the direction that matters. That’s the sound of the AI incumbents getting nervous.

CoreWeave rose after announcing a $21 billion AI cloud deal with Meta. Good for CoreWeave. But Meta now has to explain how Muse Spark actually generates revenue after releasing it. That’s the fundamental problem with the entire AI complex right now: everyone’s racing to build capacity and capability, but nobody’s actually figured out the monetization yet. It’s like the early 2000s broadband buildout—massive capex, vague revenue models.

And if energy costs start spiking materially because Hormuz is actually closed and Saudi output is genuinely damaged, these companies’ unit economics get uglier fast.

Photo by Markus Spiske / Pexels

The Canary in the Coal Mine

Cars.com is down 14.9% over six months while the S&P 500 is down only 1.8%. That underperformance isn’t random. Auto retail is a consumer proxy. Softer quarterly results mean people are pulling back on big discretionary purchases. Maybe that’s just cyclical weakness. Or maybe it’s the first whisper that consumer confidence is cracking under the weight of higher energy costs and broader inflation concerns.

My honest take: I don’t know if this becomes a recession signal or just noise. But I notice it’s happening alongside genuine geopolitical supply destruction, not speculation about supply destruction.

What Actually Matters Now

Here’s what I think happens over the next 90 days:

Energy prices either stabilize around these new, higher levels—in which case it becomes a permanent drag on margins for compute-heavy businesses—or they spike further if Iranian control of Hormuz extends to actual disruption of tanker traffic. Either way, the easy-money thesis that powered Alphabet’s ridiculous outperformance gets questioned.

The AI narrative flips from “capability race” to “efficiency war.” Suddenly companies that can train models on less power become valuable. Companies that just built massive data centers become liabilities.

Palantir’s competitor warning starts to look like a rounding error compared to the real problem: what happens to all these AI companies’ costs if energy inflation becomes real?

And Meta’s $21 billion deal with CoreWeave for AI cloud infrastructure? That could be a masterstroke if they’re planning to be energy-efficient, or a terrible capital allocation if they just spent billions on infrastructure that costs more to run than they budgeted.

Trump’s Hormuz comments are noise. The actual closure is signal.

What I’m Watching

• Oil prices and the UAE’s next move. If Al Jaber formally demands international intervention to reopen Hormuz and doesn’t get it, you’ll know Iran’s blockade is becoming accepted reality. Watch for that shift in rhetoric by late April.

• Energy costs in Q1 earnings calls. Listen for CFOs mentioning “elevated power costs” or “energy headwinds” as unexpected margin pressures. This will tell you whether the Hormuz disruption is actually flowing through to operating costs or still living in futures prices.

• Alphabet’s guidance on capex and power needs. If Google starts talking about energy procurement constraints or higher power costs in upcoming earnings, that 31.2% six-month gain looks vulnerable fast.

• Whether CoreWeave’s $21 billion commitment to Meta is followed by other mega-deals or panic-selling. If this deal is the peak of AI infrastructure euphoria before energy cost reality hits, you want to know that now, not in six months.

The market’s still arguing about whether Anthropic can compete with OpenAI. It’s not ready for the question: what happens to all of them if electricity doubles?