The complete closure of the Strait of Hormuz has shattered long-held assumptions among energy experts, who for years deemed such a scenario too improbable or unmanageable to model, according to Axios. The conventional wisdom that a full shutdown was unthinkable underscores the unprecedented nature of today's situation. No established playbook exists for what comes next.
In at least two major exercises—one in 2007 and another in 2022—assessing potential oil disruptions, planners considered a full strait closure but chose not to model it. They judged it either too unlikely or too large in scale to meaningfully address. “The idea was laughed out of the room,” said Sam Ori, who worked on the 2007 exercise at the nonprofit Securing America's Energy Future. “The view was that it just wasn't credible and would be seen as alarmist.”
This blind spot reflects what the late Harvard economist Martin Weitzman called the “dismal theorem.” Originally applied to catastrophic climate risk, the concept holds that extreme, low-probability scenarios can overwhelm conventional analysis. Such events fall outside normal policy planning, leaving institutions unprepared for their occurrence.
The current closure has upended global energy markets, with analysts scrambling to assess supply disruptions and price impacts. The lack of prior modeling means governments and companies must improvise responses in real time, raising the risk of miscalculation or delayed action.
Critics may argue that preparing for every low-probability catastrophe is impractical, as resources are finite and such planning could divert attention from more likely threats. Yet the current crisis demonstrates the cost of dismissing extreme scenarios entirely.