1973–1975 Oil Crisis Recession
The 1973–75 downturn was the first modern stagflation recession: a supply-side oil shock from the OPEC embargo collided with the end of Bretton Woods and already-elevated inflation. The S&P 500 lost roughly 48% peak-to-trough, unemployment rose from 4.6% to 9%, and inflation peaked above 12%.
What caused it
- •OPEC oil embargo quadrupling crude prices in six months
- •End of the Bretton Woods system and dollar devaluation
- •Wage and price controls unwinding into a cost-push spiral
- •Fed pivoting from accommodative to restrictive policy too late
The indicator playbook
The 1973–75 cycle is the playbook for any supply-shock recession. The yield curve inverted in advance, corporate profits collapsed over two quarters, and industrial production led the decline by months. Market-valuation ratios compressed sharply off 1972 peaks.
What ended it
Fed easing from 1974, fiscal stimulus via the 1975 tax rebate, and the eventual normalization of oil supplies. The recovery was sluggish — unemployment remained above 7% well into 1977.
Modern parallels
The 2022–23 energy shock following Russia's invasion of Ukraine and the associated inflation spike echo the 1973 dynamic, though monetary-policy credibility is far higher today than it was under Burns.