Will the 2026 Oil Crisis Dwarf 1973?
Contributed Opinion

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A Tale of Two Cities Charles Dickens opens the novel with a sentence that has become famous:

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair."

This is very fitting for today because we have the City of Fantasy and the City of Reality.

In the City of Fantasy, Donald Trump is the town crier, spewing steady BS to talk down oil, while in the City of Reality, the information looks much different. In Fantasy, the oil price is the paper future market where oil closed at about $83 on Friday, but in Reality, physical oil for delivery is selling around $150 per barrel.

In Fantasy, the S&P 500 hit record highs in the worst energy crisis in history, while in Reality, the Consumer Confidence Index is at record lows.

Most people are living in Fantasy but Reality is around the corner, where most will end up

Never before has the stock market been at record highs with Consumer Confidence at record lows.

Here is a chart that includes four of the previous lows:

There are real reasons that consumer confidence plunges like this, I mean, reality. The Ukraine war did not cause lower oil production; it was only a risk that caused oil prices to rise, causing an inflation problem. Consumers had it right, and the markets barely escaped a bear market.

In 2007/08, it was the worst market crash and financial crisis in modern history, and consumers were directly affected because it was a real estate crisis, not energy.

In 1979, the Iranian revolution occurred, where oil production only declined 4%, but the oil price doubled. In 1980, following the onset of the Iran–Iraq War, oil production in Iran fell drastically. Iraq's oil production also dropped significantly, triggering an economic recession worldwide. Oil prices did not return to pre-crisis levels until the mid-1980s. Consumers had it right, pretty fresh off the 1973 oil crisis. The DOW dropped from around 12% in October.

The 1973 oil crisis also involved Israel and the U.S.A. Congress approved $2.2 billion in emergency aid to Israel for the conflict known as the Yom Kippur War, the Organization of Arab Petroleum Exporting Countries (OAPEC) were upset with the U.S. involvement and instituted an oil embargo on the United States. This amounted to a 5% or 6% in global production but these cuts nearly quadrupled the price of oil from $2.90 a barrel before the embargo to $11.65 a barrel in January 1974

There was a severe bear market in 1973, but the economy was already facing rising inflation as the U.S. went off the gold standard and the US$ was falling. Industry was already at capacity, and many industrial materials were in short supply.

2026 Oil Crisis

This is going to be the granddaddy of them all. In 1973, global supply was cut by about 6%, and this time, with the Strait of Hormuz closure, global supply is cut by about 20%, almost four times worse. The world has changed a lot since the 1970s, and now this strait closure is running four supply shocks.

Oil and fertilizer were first hit, then LNG, with production destruction, and aluminum production circuits have also been hit, and more. A lot of oil production facilities have been destroyed or badly damaged, and it will take two years after the strait opens to restore production.

Here is the detail from an expert:

International Energy Agency (IEA) Executive Director Fatih Birol was interviewed by the French newspaper Le Figaro last week and warned that the Gulf energy shock "is more severe than those of 1973, 1979, and 2022 combined" because it is affecting oil, gas, food, fertilizers, petrochemicals, helium, and global trade all at once.

Birol said in the interview that more than 75 energy sites across the Gulf region have been attacked, with about a third severely damaged, suggesting tens of billions of dollars in repairs and a prolonged disruption of some energy flows, further tightening global supplies and compounding the disruption at the Strait of Hormuz chokepoint.

The U.S is no longer dependent on Middle East oil like the 1970s, so the immediate effects will take a bit longer. Many countries are already witnessing shortages and rationing like we saw in the U.S. in the 1970s. U.S oil companies and refineries will sell oil and gas for the best price, so U.S. supply will start leaving the country. A sure signal of the next phase in the crisis will be when the U.S. implements export controls. They will do this at a time to try to control oil prices.

If the strait does not open immediately, within a week, oil prices will drift towards the current $150 physical delivery price and will go higher until a price is reached that causes oil demand to collapse. Less automotive driving, far fewer airline flights, probably one or two airline bankruptcies.

Even when the strait opens, it will take months to get oil flowing and two or three years to get back to pre-crisis levels, and this assumes more damage is not done.

We can already be certain that there will be a big increase in inflation, and the effect of high energy prices will put a greater drag on an already slowing economy, causing a recession.

It is only a matter of time before the stock market collapses. The timing is uncertain because there is no way the market should be up at highs now. Once enough investors move out of Fantasy City to Reality City, the market will come down. At some point, the U.S. will probably respond with massive money printing (QE), and that could boost markets, but probably from much lower levels than where they are today.

We also see this market high as a second chance. If you did not raise cash levels and lower equity exposure when I was warning about it in 2025, you have a second chance.

We have plenty of exposure to the current energy crisis with our oil stocks, and I just want to update another one of our tech stocks, making new highs.

MDA Space TSX/NY: MDA

Recent Price - CA$47.75

Entry Price - CA$40.45

Opinion – Buy on weakness, below CA$46

MDA Space Ltd.'s (MDA:TSX; MDA:NYSE) stock went to new highs and looked like a major breakout would happen, but the stock eased back.

On Friday, the stock ran to almost CA$51 but closed at CA$48.15

Today, MDA has been selected by Airbus to design and build more than 880 Ka-band steerable antennas and 440 Ku-band user replacement antennas for the OneWeb low Earth orbit (LEO) constellation owned by the global operator Eutelsat.

This award follows an initial order to supply close to 2,000 antennas to the constellation, the second largest in lower Earth orbit with approximately 650 satellites, given to MDA Space by OneWeb in 2016.

The Globe and Mail reported that Sunday marked Canadarm2's 25th year in space. In that time, the iconic arm has not only proved essential for building the station, but for maintaining it day to day.

It is the orbiting facility's all-purpose handyman: Looking, adjusting, swapping parts, and generally keeping things in running order. The entire system is the most sophisticated assortment of space hardware ever built by Canada.