Drill pickle: oil prices still misjudge shock

This episode of The Intelligence from The Economist explores two major global developments: a historic oil supply shock triggered by the sustained closure of the Strait of Hormuz and the political landscape ahead of France's 2027 presidential election. Mathieu Favas, the commodities editor, explains that despite Brent crude surpassing $125 a barrel, prices remain below the peak seen during the 2022 Russia-Ukraine crisis—despite a supply deficit of 13 million barrels per day, the largest in history. This apparent disconnect is due to pre-existing market buffers, pre-war exports, idle Russian-Iranian oil at sea, and strategic stock releases. However, these buffers are now exhausted, and demand destruction has already occurred in developing nations, particularly in Asia and Africa. The real reckoning may come when prices rise further to ration consumption, especially for gasoline, diesel, and kerosene. The financial nature of the Brent futures market—dominated by algorithmic traders reacting to headlines—also contributes to delayed and asymmetric price responses. Meanwhile, France faces a pivotal election with Emmanuel Macron barred from a third term. The political field is fragmented, with no clear centrist or left-wing candidate emerging, raising fears of a far-right victory. The outcome hinges on a July court ruling on Marine Le Pen’s eligibility, with Jordan Bardella as a potential alternative. On the sports front, Brazil’s football team, led by coach Carlo Ancelotti and President Lula da Silva, enters the 2026 FIFA World Cup under immense pressure to win its sixth title after a 24-year drought, despite a lackluster qualification campaign and deep domestic economic challenges.