Oil is up and stocks are down: It's a predictable response to the dramatic U.S. attack on Iran's powerful military commander as tensions mount in the oil-rich Middle East.
But by historical standards, the reaction from the markets has been muted — at least, so far.
Early Friday, the U.S. military killed Qassem Soleimani, the leader of Iran's Quds Force, in an airstrike in Baghdad. The attack didn't directly affect oil production, and Iran is already under sanctions that keep most of its oil off the global market. But it was a sign of growing conflict. In response, global oil prices rose by about 4% initially, before settling down to a gain of less than 3%.
That pales in comparison to the 14% spike in the price of crude after a September attack on Saudi production facilities that the U.S. and its allies attributed to Iran. And even that jump in prices — triggered by an actual reduction in available oil supplies — was temporary, with the market regaining its footing shortly after.
Stocks, meanwhile, faltered slightly on Friday. After starting 2020 with a widespread rally, prominent indexes fell by less than 1%. (Major oil and gas companies were an exception, seeing stocks rise along with rising oil prices.)
It's clear there's uncertainty about the future, and investors are showing concern. But the attack did not immediately prompt wild swings in the markets.
In part, that's because the world oil market has changed dramatically. While Middle Eastern oil is still essential to the world economy, the U.S. — powered by the recent boom in shale oil — is now the largest producer of oil in the world.
"It's a new era," says John Kilduff, an energy analyst at Again Capital. "The surge in production by the United States has really created almost a firewall against these geopolitical risks that used to really haunt the oil market and consumers at the gasoline pump."
American shale producers are relatively flexible and could boost production quickly — and they're not the only ones. A global oil glut means that there's plenty of spare capacity, and Saudi Arabia, in particular, could bring more oil online very quickly.
The prospect of slightly higher oil prices, meanwhile, may not be as risky for the U.S. economy as it once was, thanks in part to the expansion of the oil industry.
"Higher oil prices tend to cause outlays on capital expenditures in the oil, energy and extraction business, which sometimes will actually more than offset the drag caused by higher gasoline prices," says Joe Brusuelas, chief economist at RSM. Compared with 10 or 20 years ago, he says, "we're now in a very different spot."
On the other hand, it's possible there's more risk ahead than investors realize.
If the conflict escalates or spreads, analysts say, oil is likely to rise more in price, and the change this time might be more sustained.
"I think the market ... is still underestimating the impact of tensions in the region," says Amy Myers Jaffe, an energy analyst with the Council on Foreign Relations.
"We don't know how the escalation in conflict will play out," she says, noting the risk of missile attacks and cyberattacks on oil producers across the region. "There's a lot of danger all across the Middle East, and it goes beyond oil, obviously."
NPR's Scott Horsley contributed to this report.