The Price of Fear

Good Morning Ladies and Gentlemen

“No one cares. That is, no one cares until the bubble begins to burst and
then everyone cares, which is exactly how markets crash.”

Jesse Felder

Last week, I read a very interesting piece by Joe Weisenthal from Bloomberg. You may remember his quote in last week’s “Stefan’s Weekly” title. This inspired me to revisit some of my own thoughts about Bitcoin, blockchain and the future of financial markets. For years, I must admit, I was (as it seems was Bloomberg’s Joe Weisenthal) rather sceptical when people argued that blockchain technology was a real revolution. It always sounded a little too convenient to me. Yet perhaps I dismissed the idea too quickly. The more I think about it, the more interesting blockchain becomes, not so much as a replacement for money, banks or exchanges, but as a potentially neutral infrastructure on which different financial institutions and instruments can interact. Blockchain-based markets are already moving well beyond conventional cryptocurrencies, increasingly encompassing sophisticated instruments such as perpetual futures. But make no mistake, innovation does not abolish risk. Every transaction leaves a digital footprint, and in an age in which the internet’s memory is virtually permanent, forgetting has become increasingly difficult. More importantly, blockchain does not make fraud, cybercrime or operational failure disappear. Quite the contrary, new technology inevitably creates new vulnerabilities alongside new opportunities. This week’s Binance hack offers a useful reminder. The infrastructure may be revolutionary, but greed, negligence and criminal ingenuity remain decidedly old-fashioned.
But now, let us jump into today’s topic, which again is all about crude oil. Since I have received a fair amount of feedback and questions about last week’s “Stefan’s Weekly”, I will therefore revisit the topic.

Crude Oil Remains Expensive

You know, one could probably say that there is a certain irony in today’s oil market. At a time when global demand is weakening, and the economic outlook is increasingly fragile, crude oil remains stubbornly expensive. The explanation lies less in economics than in geopolitics. The war surrounding Iran, disruption to Gulf exports and continuing threats to Saudi energy infrastructure have transformed oil from an ordinary commodity into an insurance policy against uncertainty. The IEA’s October 2026 Oil Market Report notes that global inventories have fallen materially since February, reducing precisely the cushion the market needs in times of crisis. Normally, deteriorating demand would pull prices lower. Today, however, the market is asking a different question. What happens if tomorrow’s barrel never arrives? As long as that question remains unanswered, fear will command a price. And history teaches us that fear can remain expensive considerably longer than fundamentals would suggest.

What Must Happen Before Crude Can Fall

So, Ladies and Gentlemen, this brings us to the interesting question of what would change the picture? Probably not weaker demand alone. The IEA’s October 2026 Oil Market Report expects global oil demand to decline by 2.6 million barrels per day in 2026 and supply to recover strongly in 2027. Under normal circumstances, that combination would be highly unfriendly to oil prices. But these are not normal circumstances. Before crude can fall sustainably, politics must first allow economics to matter again. That requires credible de-escalation around Iran, safer passage through the Strait of Hormuz, more dependable Gulf exports and, ultimately, a rebuilding of inventories. Only then can the geopolitical premium gradually evaporate. Markets rarely demand certainty, but they do demand visibility. Once traders stop worrying about which barrels might disappear tomorrow and start wondering who will buy all those barrels instead, oil could fall surprisingly quickly, but I truly think we are not just there yet.

El Niño or When Nature Joins the Equation

And then there is the weather, another stubborn variable which neither central banks nor politicians can control. El Niño began in May and could develop into a “Super El Niño”, with the current cycle expected to peak around November. Yet, as so often, the real story may begin when everyone believes it is already over. Researchers point out that some of the most meaningful consequences can materialise three to five months after El Niño has subsided. If the phenomenon fades rapidly after its expected November/December peak, attention will inevitably move elsewhere, while its economic repercussions may only be starting to unfold. For oil, this adds another layer of uncertainty to an already fragile equation. Weather-related disruptions can affect production, refining and transportation, while unusual temperatures can shift energy demand in unexpected directions. Markets like to believe that everything eventually returns to equilibrium. However, nature occasionally reminds us that the journey there is rarely a straight line. Think about it!

Conclusion

Jesse Felder’s observation at the beginning of this week’s edition captures the common thread rather neatly. Markets have an extraordinary ability to ignore imbalances until ignoring them is no longer possible. Whether we are talking about Bitcoin, big tech, artificial intelligence or crude oil, the mechanism is surprisingly similar. Narratives dominate for long periods, fundamentals appear almost irrelevant, and risks that everybody knows about somehow cease to feel like risks at all. Then something changes.
For crude oil to fall sustainably, the market must first regain confidence that Middle Eastern barrels will reach customers reliably. That requires more than reassuring rhetoric or another fragile ceasefire. A credible de-escalation, safer passage through the Strait of Hormuz and diminishing threats to Gulf energy infrastructure would gradually remove the geopolitical premium embedded in today’s price. Once that happens, fundamentals should regain the upper hand, leading to a recovery in supply, and I suppose, as a consequence, inventory rebuilding. Together, this would argue for lower prices. Yet geopolitics is not the only uncertainty. El Niño reminds us that weather can disrupt production, transportation and refining long after the phenomenon itself has peaked. The road towards cheaper oil may therefore be less straightforward than some fundamentals suggest. Markets have always disliked uncertainty, and oil perhaps more than most. Or, as the old saying goes, “The cure for high prices is high prices.” Eventually, demand adapts, supply responds and equilibrium returns. The only question is how much turbulence lies between here and there.

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li. Many thanks, indeed!

I wish you an excellent start to the day and weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
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9494 Schaan/Liechtenstein
Mail: smk@incrementum.li