Deutsche Bank believes that markets tend to assess each shock in isolation and assume prices will eventually return to normal, but consecutive disruptions in energy, shipping, and trade can have a cumulative effect. During the first oil shock in 1973, oil prices nearly quadrupled, and after the second shock in 1979, they more than doubled again. In recent years, circumnavigating the Red Sea has extended some voyages by more than a week, and droughts have reduced the Panama Canal's capacity by 30%. When residents and businesses experience consecutive price increases, inflation expectations and wage pricing may adjust accordingly. Central banks must avoid over-tightening in response to short-term shocks, while also preventing medium-term disturbances from being misjudged as temporary phenomena.
