By the late summer of 1979, the global economy was already jittery, but the sudden announcement of an Iranian oil embargo sent shockwaves through financial markets and living rooms across the world. Fearing the conflict would spread and make the oilfields unusable, oil-producing nations began to restrict exports, creating a supply shock that had little to do with the US specifically but everything to do with the region’s instability.
Iranian Embargo 1979: How Financial Markets Reacted to the Supply Shock
In the United States, it accelerated investment in alternative energy sources, from nascent solar and wind technologies to controversial projects like synthetic fuel production. The overthrow of the Shah, a long-standing US ally, created a power vacuum and a deep anti-American sentiment among the new revolutionary leadership.
When the Shah, who was receiving medical treatment in the United States, began to show signs of cancer, Iranian radicals saw his presence in New York as a desecration. The ensuing Iran-Iraq War threatened to destabilize the entire Persian Gulf, the world’s primary oil-producing region.
Iranian Embargo 1979 Financial Markets: Global Shockwaves and Market Reactions
Motorists faced not only higher prices at the pump but also the indignity of waiting in line for hours under the sweltering summer sun, unsure if fuel would even be available when they reached the front of the queue. Members of the Organization of Arab Petroleum Exporting Countries (OAPEC) moved to restrict oil exports to nations perceived as supporting Israel in the ongoing Arab-Israeli conflict, particularly the United States and the Netherlands.
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