Lagarde: markets may be “overly optimistic” about the oil shock | The Economist

We are facing. a real shock. that is. probably beyond. what we can imagine. at the moment. I would agree with that. I look at. financial markets. and I think there's. some kind of. cognitive dissonance. going on. Do you think. there is just. a blind optimism? That somehow. this is going to be. over and the world. will go back to normal. and people are going. to suddenly wake up? Or will it be a. gradual realisation that. there are going to be. really significant. consequences? Maybe they’re. overly optimistic. and determined. to stay optimistic.

in the hope. that the. positive scenario. will materialise. and we will. be back to normal. in a relatively. short time, which is not what. the technical experts. are telling us. in terms of. capacity, extraction, refinery, distribution, Because too much. has already. been damaged. and there is no way. that it can be restored. in a matter of months. Most people are actually. talking about years. What I think. might also happen, because we've. experienced it, is that you understand.

the actual. consequences gradually. as you read through. the facts, the supply-chain. consequences, the kind of. raw materials. that is. critically important. for a particular. manufacturing. I’ll give you an example. Helium, which transits. through the. Strait of Hormuz, is critically important. for microchips. Well, unless. you’ve figured that out, you’re not certain. that there will be. instant or. relatively quick. consequences on. the cost of. microchips.

because of the rarity. that will result from. not having available. one of the. raw materials. And I think. this is a crisis where. we are learning. almost bit by bit, day by day, what the actual. consequences will be, what countries will be. most affected, what of the. commodities will be. the most in demand.