The 1973 Oil Crisis began when Arab members of OPEC imposed an embargo on the U.S. and several Western nations for supporting Israel during the Yom Kippur War.
The embargo sharply reduced global oil supply, causing prices to quadruple within months.
Gasoline shortages spread across the U.S. and Europe; long lines formed and speed limits were lowered to conserve fuel.
Inflation surged while economic growth stalled, pushing Western economies into recession.
Energy-dependent industries—transportation, manufacturing, plastics—experienced severe slowdowns.
The shock ended the post-WWII era of cheap, abundant oil.

What Drove the Crisis

Geopolitical conflict triggered a coordinated supply cut by oil-exporting nations.
The global economy depended heavily on Middle Eastern oil with limited spare capacity.
OPEC recognized its market power and used oil as a diplomatic tool.
Industrial economies had built systems around cheap energy and lacked buffers when supply tightened.
Central banks loosened policy in response to rising prices, fueling inflation instead of containing it.
The result was “stagflation”: high inflation combined with weak economic growth.

Investor Lessons

Dependence on a single essential commodity creates systemic vulnerability.
Supply shocks in core inputs like energy can ripple through the entire economy.
Diversification of energy sources, strategic reserves, and resilient supply chains reduce risk.
Geopolitical events can overwhelm economic fundamentals and ignite inflation.
Energy costs influence margins, transportation, consumer behavior, and inflation expectations.
Stability can vanish quickly when a dominant supplier exercises leverage.

The Oil Crisis (1973)