Key Moments
- Rabobank’s Michael Every contends that oil futures prices are not adequately capturing ongoing war and supply disruption risks related to Iran and the Strait of Hormuz.
- He outlines outcomes from a potential broad US victory over Iran to extended blockades and deeper escalation that may only be reflected in physical oil markets.
- Recent refinery incidents in Australia and policy tensions in Europe are cited as reinforcing longer-term concerns over energy security, pricing, and infrastructure capacity.
War Risk Scenarios vs Market Pricing
Rabobank Global Strategist Michael Every argues that financial markets are behaving as if the conflict involving Iran and potential disruption in the Strait of Hormuz has largely been resolved, even though the risks to physical oil supply remain elevated. In his view, oil futures prices are failing to align with the full spectrum of geopolitical and logistical threats still in play.
Every outlines a range of possible outcomes for the conflict. He notes that, in line with his long-standing base case, there is still a scenario in which the United States secures what he describes as a broad, albeit “naturally disputed,” win over Iran by the second to third week of April, resulting in what he calls de facto US control of a “new Middle East.” He also acknowledges what he terms a less likely outcome of “a belated TACO.”
However, he stresses that the downside risks are substantial. These include the possibility of extended blockades and “tail risks of any new escalation deepening and/or widening the war.” According to Every, such severe outcomes may be more accurately reflected in spot or physical oil markets than in the pricing of oil futures contracts. He suggests this divergence signals a disconnect between financial market expectations and the realities of supply vulnerability.
Strains on Energy Infrastructure in Australia
Every points to developments in Australia as a concrete example of mounting stress on energy infrastructure. He notes that the country now requires greater energy imports as “a fire rages at one of its two oil refineries,” describing it as the latest in “a series of such accidents at the few western facilities still operating.” While the cause is unclear, he raises several possibilities – whether it is “an accident, sabotage, or just the result of over-working the facility in a crisis” – but emphasizes that the implications are serious regardless of the trigger.
He cites comments from the founder of Ivanhoe Mines, who warned: “The Australian mining industry is now on the verge of collapse due to diesel shortages… the fuel supply chain that powers every drill, truck, and haul is about to snap.” Every uses this observation to question how such a fragile situation developed, asking rhetorically, “Who drove that decline in refineries, one may ask? Markets and their uncanny ability to ‘price things in.’”
European Energy Policy and Security Concerns
In Europe, Every highlights policy signals that, in his view, add another layer of complexity to energy security and pricing. He notes that Brussels “warned EU countries not to hoard fuel within their borders weeks after telling everyone there was no risk of an energy crisis.” At the same time, he reports that the European Commission “also wants to see fossil fuels taxed higher than electricity to drive the EU towards renewable energy in the long term.”
He contrasts this with the behavior of some member states, stating that they “are doing the opposite in the face of this crisis so far.” From a broader geopolitical standpoint, he refers to warnings that “‘Fuel scarcity is European armies’ ‘Achilles’ heel’’” and underscores a key operational vulnerability: “No military, and no mine, currently runs on electricity.”
Summary of Key Risks and Policy Tensions
| Theme | Detail |
|---|---|
| War and Hormuz disruption | Markets are seen as assuming conflict resolution, while physical supply risks from Iran-related tensions and possible blockades remain significant. |
| Australia energy infrastructure | Fire at one of two oil refineries and a series of accidents at remaining Western facilities raise concerns about diesel availability and mining sector viability. |
| European energy policy | EU warnings against fuel hoarding, proposed higher fossil fuel taxes, and fears over fuel scarcity as a strategic weakness create policy and security uncertainty. |
Questioning Market Efficiency
Drawing these strands together, Every contends that the issue is not simply that markets have priced in only one geopolitical path forward. Instead, he argues that prevailing market behavior overlooks a future defined by persistent uncertainty and frequent surprises, where outcomes are routinely not “priced in.”
He concludes with a broader critique of market purpose and economic measurement, stating: “Pulling this all together, it’s not just that the market has priced in only one possible geopolitical scenario ahead: it’s not pricing that geopolitics suggests a future when things aren’t priced in as the norm. At which point, what are markets for? Try answering that without answering what GDP is for.”
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
