The Oil Shock

The Oil Shock refers to a sudden and significant increase in oil prices, often caused by geopolitical events, production cuts, or supply disruptions. This surge raises transportation and manufacturing costs, leading to higher prices for goods and services across the economy. The resulting inflation can slow economic growth and increase uncertainty, affecting consumers, businesses, and governments alike. The most notable example occurred in the 1970s when geopolitical tensions in the Middle East led to sharply higher oil prices, highlighting how dependence on oil can make economies vulnerable to external shocks.