What the 1970s Oil Crisis Tells Minneapolis Duplex Investors About What’s Coming Next

For those old enough to remember gas lines in the 1970’s, the current Strait of Hormuz crisis has many landlords wondering not only whether they should trade in their car for an EV, but also what the impact of runaway oil prices was on real estate back then.

The 1973 Arab oil embargo triggered a wave of inflation that impacted housing markets in ways nobody predicted. Inflation averaged over 7% for most of the decade, peaking above 13% in 1979.

And here’s the twist landlords loved: real estate became the go-to inflation hedge.

Nominal home prices surged — the 1970s saw the fastest median home value growth of any decade between 1940 and 2000. Rents followed inflation upward. Mortgage rates eventually hit the mid-to-high teens, locking millions out of ownership and into rentals.

High mortgage rates always result in a strong rental market.

So how does that compare to today?

Since February, Iran has effectively blocked the Strait of Hormuz. Since 25% of global seaborne oil and 20% of global natural gas travel through the strait, this has been called the largest supply disruption in the history of the global oil market. The IEA has called this the largest supply disruption in the history of the global oil market. The Dallas Federal Reserve estimates a sustained closure could raise oil to $98/barrel and shave nearly 3 percentage points off global GDP in the second quarter alone.

In 1973 when the OPEC embargo cut global oil supply sharply, whichcaused a double digit spike in inflation. In today’s crisis, prices are also rising fast.

Where it’s different is the U.S. economy isn’t as dependent on foregin oil today as it was then. Between increased domestic production and

Where It Differs — and Why It Matters for You

The U.S. is not the oil-dependent economy it was in 1973. Domestic production is at historic highs, and energy efficiency has improved dramatically. That insulates the U.S. somewhat. But oil is a global commodity, so prices will rise everywhere.

Where things really differ between now and 1973 is in housing. Affordability is at historic lows, and has been for several years. In the 1970’s, baby boomers were first-time home buyers, which helped fuel demand. The bigger difference is today’s starting point: between mortgage rates above 6% and a lack of inventory, housing affordability is already at historic lows. Add inflationary pressure from an oil shock and rates could spike further, not ease.

The 1970s crisis primarily hurt buyers and helped landlords. Today’s version may do the same — but with an already-squeezed rental market, rising rents could pinch affordability faster and more sharply.

Also unlike 1973, the Hormuz crisis hits natural gas and manufactured goods (steel, chemicals, fertilizers), not just oil. That means construction costs will rise, causing new housing construction to slow, and the inventory crunch may get worse.

If the 1970s are your playbook, here’s what to expect: rents climb and vacancy drops. Construction will slow due to cost pressures and a lack of new supply.

The risk? If inflation spirals and the Fed responds aggressively — as it did in the early 1980s — you could face a prolonged stagnation in property values and refinancing pain if you’re on an adjustable mortgage. Staggeringly high inflation could result in the fed levying brutal interest rate hikes.

Lock in your rates. Hold your properties. And be a good landlord — because in this environment, your tenants need it, and your vacancy rate will thank you.