Oil tanker Odessa, carrying UAE crude after passing through the Strait of Hormuz, navigates the waters at Daesan port in Seosan, South Korea, in May.Kim Soo-hyeon/Reuters
One thing this year reminded me of is how quickly markets can humble even the smartest people.
When the conflict with Iran escalated and the Strait of Hormuz all but closed, the consensus was almost immediate: Oil was going to US$200 a barrel. Frankly, it wasn’t an unreasonable conclusion. Roughly 20 per cent of the world’s oil normally moves through that waterway. The 1973 oil embargo involved a much smaller disruption and still sent prices soaring. History seemed to point in one direction.
Instead, benchmark Brent crude briefly approached US$120 before gradually falling back toward the low US$70s as negotiations progressed and shipping resumed.
So what changed?
China did.
Oil price shock hit business, consumer sentiment, Bank of Canada says
While most investors were focused on supply, China quietly reduced its crude imports from roughly 11 million barrels a day to about 7.8 million. That decline may have absorbed most of the disruption in global oil trade. It wasn’t the variable anyone was talking about, but it may have ended up being the one that mattered.
Markets have a funny way of doing that.
I’ve learned over the years that the factor everyone is debating is often not the factor that ultimately drives prices. Sometimes it’s demand instead of supply. Sometimes it’s currencies instead of fundamentals. Sometimes it’s something nobody had on their radar.
Gold offered another reminder. You would normally expect geopolitical tension to push gold sharply higher. Instead, the U.S. dollar strengthened as investors rushed toward safety, real yields moved higher and gold sold off from its highs. The headlines were the same, but the market’s reaction was completely different.
This all leads me to the Gestalt theory: You can’t understand the whole picture by examining each individual piece in isolation. Energy markets work the same way. Every variable matters, but they don’t matter equally, and they certainly don’t move independently.
One development genuinely caught me by surprise this year. Helium and sulphur, commodities most people rarely think about, became an issue for semiconductor manufacturing because they’re byproducts of natural gas processing. When Iranian strikes disrupted Qatar’s Ras Laffan complex, helium supplies tightened almost overnight and prices jumped. It was a good reminder that today’s AI economy depends on supply chains that few of us ever think about until something breaks.
For Canada, I think this creates an opportunity.
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Reliable energy has become a strategic asset, not just an economic one. Between our LNG export capacity, expanding infrastructure, abundant natural resources and political stability, I believe Canada is in a stronger position than many appreciate. Countries are no longer just looking for the lowest-cost supplier. Increasingly, they’re looking for the most dependable one.
The analysts who predicted US$200 oil weren’t reckless. They were working with the information available at the time. Markets simply introduced a variable that almost nobody anticipated.
That’s investing.
You do the work. You build a thesis. And then you stay humble enough to accept that the world is always more complicated than your model.
That’s not a reason to stop making forecasts. It’s a reminder not to become too attached to them and when it comes to portfolio management, make allocations that are appropriate.
Jonathan R. Pinsler, CFA, is senior portfolio manager at TD Wealth Private Investment Advice