Identifying daily oil market shocks: evidence from the Hormuz crisis

Daniele Valenti, Chiara Casoli, Matteo Manera and Luca Pedini
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Daniele Valenti: Department of Management, Economics and Industrial Engineering-DIG, Politecnico di Milano and Fondazione Eni Enrico Mattei
Chiara Casoli: InsIDE Lab, Department of Economics-DiECO, University of Insubria and Fondazione Eni Enrico Mattei
Matteo Manera: Department of Economics, Management and Statistics-DEMS, University of Milan-Bicocca and Fondazione Eni Enrico Mattei
Luca Pedini: Department of Economics and Social Sciences-DiSES, Marche Polytechnic University and Fondazione Eni Enrico Mattei

No 2026.21, Working Papers from Fondazione Eni Enrico Mattei

Abstract: This paper develops a daily Bayesian structural VAR model of the global crude oil market that decomposes the real price of oil into three fundamental drivers: shocks to global real economic activity, shocks to oil price expectations and shocks to physical oil supply. We combine a daily sign-restriction identification strategy with a posterior filtering step based on monthly physical oil market data, which sharpens the economic interpretation of the estimated daily shocks. We apply the model to provide a real-time interpretation of the main drivers behind the 2026 Strait of Hormuz crisis, one of the largest and most abrupt oil price shocks of recent years. Our results show that oil supply shocks account for the bulk of the initial price surge following the closure of the Strait, aggregate demand shocks become increasingly important in sustaining elevated prices over the following weeks and expectational shocks act in the direction of mitigating the oil price surge. We further validate the model against four major historical episodes – the 2003-08 oil price boom, the Global Financial Crisis, the 2014-15 oil price collapse, and the COVID-19 pandemic – showing that the daily decomposition is consistent with the prevailing narrative of these events. The framework offers policymakers a timely tool for monitoring the structural sources of oil price fluctuations as they unfold.

Keywords: Oil price shocks; Structural VAR; Daily data; Bayesian identification; Strait of Hormuz; Real-time monitoring (search for similar items in EconPapers)
JEL-codes: C11 C32 Q41 Q43 (search for similar items in EconPapers)
Date: 2026-07
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