By Mark Jaffe, EUCI energy writer
The United States economy has weathered the global oil shock created by the Iran war better that the rest of the world with its gross domestic product (GDP) suffering a fraction of the worldwide decline, according to a Federal Reserve Bank of Dallas report.
“Our analysis demonstrates that the contraction in the U.S. in response to a geopolitical oil supply disruption used to be similar to that in the rest of the world in 1980, but this is no longer the case,” the study said.
“The disruption in global oil supplies today is only one-twentieth of what it would have been in 1980,” according to the analysis.
The 2026 drop in global oil supplies was more than twice as large as the peak loss during the 1973 oil crisis, which was the largest geopolitical oil supply shortfall on record before 2026.
The closing of the Strait of Hormuz cut off about 20% of global supplies, but alternative routes out of the Middle East along with increased output by other producers, including the U.S., left the world with a 15% supply deficit.
That 15% shortfall reduced annualized U.S. GDP by 0.26% compared to the global decline of 1.7%. Had the same shortfall occurred in 1980, the report estimated U.S. real GDP would have been cut by 5.63%.
“We traced this decline in sensitivity mainly to a combination of two structural changes: the U.S. becoming a net oil exporter following the shale revolution and the substantial decline in the U.S. oil expenditure share,” the report said.
When the Arab oil embargo began in 1973, the U.S. was importing 34% of its oil. Since 2019, the country has been a net exporter, and between 1980 and 2024, the portion of GDP spent on oil and oil products dropped to 3% from 8%.
The U.S. also consumes a smaller share of world oil today with the oil expenditure share dropping by 60% as Asia consumed more oil.
That was consistent with the U.S, economy becoming more service-oriented and more fuel-efficient, the study said. The result is that price movements in the oil market have a smaller impact on households and business.
As a net oil exporter, the U.S. also benefits from the higher oil prices, generating income that partially offsets the decline in non-oil output.
The Dallas Federal Reserve Bank economic model projects a two-quarter closure of the strait would reduce U.S. GDP by 0.1% on a four-quarter basis compared to a 0.2% decline for the rest of the world.
Under a three-quarter closure scenario, the U.S. contracts by 0.3% while the rest of the world sees a 0.8% drop in GDP.
“The U.S. economy has undergone such a fundamental transformation in its relationship with global oil markets that the kind of devastating oil price shocks that policymakers became concerned with in the 1970s and 1980s no longer pose the same threat today,” the study said.
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