How far can we extrapolate the resilience of the global economy? - 20 April 2026

De-escalation is accompanied by hopes of a reopening of the Strait of Hormuz

Our central scenario of de-escalation in the conflict opposing the United States and Israel to Iran appears to be taking shape. The outcome of the talks, still ongoing in Islamabad, is uncertain, but the very fact that they are taking place is in itself a calming factor and makes the ‘conflagration’ scenario less likely.

In the immediate term, the Strait of Hormuz remains closed (Chart 1), causing disruptions in the supply of crude oil and refined products, natural gas, and other products from the region’s petrochemical industry (ethylene, methanol, ammonia, nitrogen fertilisers, etc.).

However, the extension of the ceasefire to the conflict between Israel and Hezbollah in Lebanon raises hopes of a quicker reopening. The probability of a full reopening of the Strait of Hormuz (a return to an average of 60 tankers per day) before the end of April is 50%, according to the Kalshi prediction market, and nearly 80% before 1 July (Chart 2).

De-escalation is easing pressure on spot prices, but above all it is drastically reducing the probability of a conflagration scenario. Accordingly, the implied volatility of oil options has been falling quite markedly over the past few days (Chart 3).

The shortfall in oil supply is already priced into the barrel

The spot price of the affected commodities already reflects the decline in supply (and the associated destruction of demand) and its expected duration. Let us take the example of oil (we will use Dated Brent as the international benchmark for spot crude). To calculate the equilibrium price, we need three ingredients: the equilibrium spot price before the loss of supply (USD 68/bbl on average before the shock), the quantity of supply lost (between 0 and 20 mb/d), and the sensitivity of oil demand to its price (the price elasticity of demand).

According to calculations by Goldman Sachs experts, the net loss of production is between 10 and 12 mb/d (Chart 4).

The estimate of the price elasticity of demand is crucial. Because it is considered to be low, it is commonly accepted that oil is highly volatile, i.e. the price increases required to curb demand are large. Usual estimates in the literature range from 0.10 to 0.20. We can therefore deduce the price increase, starting from USD 68/bbl, that would be needed to reduce demand sufficiently (see table below).

The current Dated Brent price of USD 116/bbl is consistent with a lasting loss of 10–12 mb/d and a reasonable assumption for the price elasticity of oil demand (light blue area in the table).

For now, de escalation is being confirmed, the probability of a conflagration scenario has collapsed, and the oil price already reflects the missing barrels on international markets. However, the central question remains the resilience of the global economy (and financial markets) in the face of a shock of considerable magnitude, even if its duration is expected to remain limited.

Investors have learnt to believe in the resilience of the global economy

The idea of resilience derives from the experience of recent years. What economists and investors have learnt from the Covid 19 pandemic, the inflation shock associated with the post Covid reopening, the bond crash of 2022 and, finally, the trade war of 2025, is the extraordinary resilience of the global economy. It is with this experience in mind that economists and investors have approached the shock of the closure of the Strait of Hormuz since 27 February 2026.

The question of the resilience of the economic system has been notably explored by Markus Brunnermeier, a professor at Princeton. Brunnermeier distinguishes between the robustness of a system and its resilience. Robustness is the ability to absorb exogenous shocks without moving. Resilience is the ability to bounce back after a shock and quickly return to the previous trajectory. The analogy for robustness is a brick wall that takes hit after hit without moving, but gradually cracks and weakens until a sufficiently powerful blow destroys it. Resilience is like a trampoline, flexible and deformable, which adapts to the shock and then regains its original shape.

The difference between the 2008 global financial crisis (GFC) and the Covid 19 crisis illustrates this distinction. After the great financial crisis, the world economy was never able to return to its previous trajectory, whereas the Covid 19 shock was only a temporary deviation (Chart 5). This ability to rebound is the hallmark of resilient societies and economic systems. It is important to note that resilience does not prevent economic cycles or recessions; it simply allows a rapid return to the mean afterwards.

Another idea put forward by Markus Brunnermeier is the paradox of macro vs micro resilience. A resilient economy at the macro level does not mean that all firms are resilient too. On the contrary, shocks create winners and losers, and the economic system adjusts through destructive creation.

It is too early to draw a firm line under the closure of the Strait of Hormuz and its consequences. For the time being, investors are giving the global economy the benefit of the doubt on its resilience.

Portfolios positioned for our central de escalation scenario

In our portfolios, we tactically increased our equity exposure from 23 March in line with our central de escalation scenario, across all international and European “Global Macro” strategies.