Crude Oil Surge and Chaos in the Strait of Hormuz: Minds Pulled Toward the Worst-Case Scenario [News x Investment Psychology]
The star of the week was crude oil.
But to be precise, rather than the oil itself, it might have been the anxiety over “whether the oil will actually arrive.”
Following the deterioration of the situation in Iran, logistics through the Strait of Hormuz suddenly thinned out.
When strong news breaks, it is easy for the mind to immediately construct a “worst-case future.”
This week, I strongly felt that temperature in the market.
According to reports, tanker traffic through the Strait of Hormuz dropped to almost zero as of March 4.
This strait is a vital point that handles about 20% of the world's crude oil and LNG transport.
As for Japan, 80% to 90% of its imported crude oil passes through the Strait of Hormuz.
1. Weekend Figures (3/6)
Nikkei Stock Average (Closing Price): 55,620 yen
TOPIX (Closing Price): 3,716 pt
Dollar-Yen (17:00): 157.52–55 yen
2. The Atmosphere This Week
The atmosphere this week was shaped by the worsening situation in Iran and the accompanying anxiety over crude oil supply.
In the latter half of the week, WTI futures rose by 12% at one point, and Brent also saw a significant increase.
The background to this was that transit through the Strait of Hormuz actually thinned out, making it visible that “supply might be disrupted.”
In the stock market, that anxiety spread directly into risk-off sentiment.
In the first half of the week, Asian stocks were heavily sold, and U.S. stocks at the end of the week were also pushed down by the rise in oil prices and weak economic indicators.
On the other hand, in the Tokyo stock market, there was buying on dips toward the end of the week, and while caution remained, there were also signs of movement seeking a temporary calm.
In other words, this week was, I believe, a week where two questions were asked simultaneously:
“Will the crude oil supply really stop?”
“To what extent will the market price in the worst-case scenario?”
3. What I Felt
In a week where geopolitical news is strong, it is easy for a “worst-case future” to immediately form in one's mind.
Oil prices rise.
Stocks fall.
Inflation reignites.
The economy worsens.
Of course, that is a possibility.
But the market does not always move in a straight line toward the worst outcome.
I was a little careful about that this week.
When scary news comes out, people tend to draw the worst picture first among the things that “could happen.”
Moreover, the more vivid that picture is, the more likely we feel it is to actually occur.
Watching the news about crude oil and the Strait of Hormuz this week, I was a little wary of the speed of that imagination.
4. Investment Psychology
What I felt this week was “a mind pulled toward the worst-case scenario.”
When people are exposed to intense news like war, they tend to “the worst possible outcome” first.
Moreover, the more plausible it seems, the harder it becomes to see other possibilities.
However, there was another perspective in the market this week.
Reports from sources like Reuters indicate that movements in the crude oil derivatives market suggest traders may view this shock as a short-term shock rather than a long-term structural change.
In other words, the market was not looking only at the worst.
That is why, with intense news, I try to think like this:
“Is this truly the ‘beginning of the worst’? Or is the worst-case picture just already complete in my head?”
Just by asking this one question, my perspective becomes a little calmer.
5. Notes to myself for next week (3 points)
① Do not group crude oil, currencies, and stocks under a single reason
The reasons why crude oil rises, why stocks fall, and why the dollar-yen moves are all slightly different. First, look at them separately.
② Assume both a prolonged scenario and a short-term scenario
If the chaos in the Strait of Hormuz drags on, it will be troublesome. But there are also movements in the market that view this shock as short-term. Do not jump to conclusions based on only one side.
③ Decide in advance how to act if things collapse significantly
If the Nikkei drops more than expected, do not just end up panicking and being afraid. Focus on the high-quality stocks you are monitoring and decide in advance, ‘At what price level will I consider buying?’
6. To everyone who has read this far
What kind of week was it for you in the market?
If there was a moment that caught your attention the most, I would be happy if you could let me know in the comments, even if it is just a word (^-^)
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