When Brent crude surged to $120 per barrel in late March, the coverage was comprehensive, vivid, and relentless. Closed tanker lanes, stranded seafarers, drone attacks on UAE oil infrastructure, Goldman Sachs warnings about localized shortages: the information environment for Canadian investors in March and April 2026 was saturated with easily recalled, emotionally salient examples of a worst-case energy scenario. That information environment is precisely the condition under which the availability heuristic operates most powerfully.
The availability heuristic, identified by Kahneman and Tversky in their 1973 paper "Availability: A Heuristic for Judging Frequency and Probability," describes the cognitive tendency to assess the likelihood of an event based on how easily a relevant example springs to mind. When dramatic events are recent and heavily covered, they are highly available in memory, which causes people to treat them as more probable than the historical base rate justifies. The heuristic is not a flaw in reasoning. It is an adaptation that works well in environments where the most memorable events are also the most important ones. Financial markets are not that environment.
The Pattern This Creates in Portfolio Behaviour
Research by Barber and Odean, published in the Journal of Finance in 2000, documented what happens to retail investor portfolios when news-driven attention governs trading decisions. Their study of 66,465 household accounts from 1991 to 1996 found that attention-driven buying consistently underperformed the broad market by 2.65 percentage points annually on a risk-adjusted basis. The mechanism is straightforward: investors buy into attention-grabbing events at elevated prices and sell out of attention-grabbing events at depressed prices. In both cases, the decision is driven by cognitive availability rather than probabilistic analysis.
The current environment is generating precisely the attention conditions that Barber and Odean identified as most dangerous. Brent crude surging 55% in five weeks. Trump declaring the ceasefire on "massive life support." Saudi Aramco warning of sustained supply loss. These are not fabricated concerns: the supply disruption is real and consequential. But the intensity of coverage has elevated the worst-case scenario to a level of cognitive availability that is structurally out of proportion to its probability, given that Brent has already retraced from $120 to $94 as the ceasefire held.
The chart above shows Brent crude price alongside a proxy for investor anxiety, the VIX volatility index, over the past twelve weeks. During the period of maximum oil price stress in late March, VIX was elevated significantly. The subsequent partial oil price recovery has not been accompanied by a proportional decline in expressed investor concern, a divergence consistent with the availability heuristic's persistence after the triggering event has partially resolved.
Brent crude has retraced approximately 21% from its $120 peak following the April 8 ceasefire, while the VIX, a measure of implied market volatility, remains elevated relative to the pre-war baseline. The divergence between oil's partial recovery and persistent investor anxiety is consistent with the availability heuristic delaying cognitive adjustment after a salient negative event. Source: Trading Economics, Yahoo Finance.
What Thaler's Research Adds to the Picture
Richard Thaler's work on mental accounting offers a complementary lens. In the current environment, investors tend to mentally segregate their energy-related holdings from the rest of their portfolio, treating the oil shock as a distinct category of risk rather than analysing its actual net effect on their specific portfolio. A client with a balanced Canadian portfolio has exposure to energy stocks that benefit from high oil and bank stocks that are hurt by it, in roughly offsetting proportions. The availability heuristic causes the oil shock to feel like a pure negative because the negative news is what dominates the information environment. The positive effects, energy sector gains, do not generate the same media coverage. Thaler would recognise this as a classic mental accounting failure: the threat is vivid, the offset is invisible.
The advisory implication is concrete. Clients who are currently feeling that their portfolios are heavily damaged by the oil shock may be surprised to learn the actual numbers, which in many balanced accounts reflect a more complicated and less alarming picture. The conversation that helps a client see the full ledger rather than the available portion of it is exactly the kind of cognitive intervention that Kahneman and Thaler's research identifies as the advisor's highest-value function.