WTI crude settled at $102.16 a barrel on September 14, up 24 per cent from $82.36 three weeks earlier. Over that identical stretch, the CBOE Volatility Index moved from 15.45 to 17.10, a gain of 11 per cent. The two instruments are supposed to move together when the source of an oil rally is geopolitical. Here they have not.
The Spike That Reversed in One Session
The clearest evidence sits in a single 48-hour window. Iran-aligned militias struck Saudi Arabia's East-West pipeline on September 10 and 11, shutting down the 4 to 5 million barrel-a-day route that bypasses the closed Strait of Hormuz entirely. The International Energy Agency put Saudi crude supply at its lowest level in more than three decades. WTI jumped to $102.48 that day.
The VIX jumped too, to 17.84, its high for the period. Then, on September 11, with the pipeline still shut and oil still trading above $100, the VIX fell back to 15.84. It did not fall because the risk resolved. It fell because the market had already, in effect, priced the next escalation before it happened.
What Anchoring Predicts, and What Happened
Kahneman and Tversky, publishing in 1974, described anchoring as the tendency to set a reference point early and adjust insufficiently from it as new information arrives. Applied here: the VIX's baseline through this stretch was never a calm, pre-conflict level. It was already elevated by seven months of a live Hormuz closure that began February 28. Every subsequent escalation, including one that removed a multi-million-barrel bypass route, gets measured as a small move away from an already-elevated anchor rather than as the standalone shock it would represent in isolation.
This is different from complacency in the ordinary sense. The VIX is not ignoring the war. It is pricing the war's marginal news relative to a reference point that already contains most of the war. The effect is the same either way for a client reading the headline number: a fear gauge in the mid-teens, next to an oil price up a quarter in three weeks, looks like reassurance. It is closer to an instrument that has stopped being a leading indicator for this specific story.
Oil crude has risen for three straight weeks against a fear gauge that gained a third as much on a percentage basis and gave back its one real spike within a day, and that divergence is the story a client will not see by checking either number on its own.
The VIX's September 10 peak of 17.84 came the day of the Saudi pipeline strike and had reversed to 15.84 by the next session, even as WTI held above $100. Source: Investing.com daily settlement data.
Why the Gap Persists Instead of Closing
A single anchoring episode would correct itself once the market absorbed the new information. Seven months in, the correction has not happened because there has been no single moment to correct against. The Strait of Hormuz closure that began February 28 was followed by a June memorandum of understanding, its collapse in early July, and now a pipeline strike that removed Saudi Arabia's main workaround. Each event resets the anchor slightly higher rather than resetting it to a genuinely calm baseline.
For a Canadian portfolio, the practical consequence is that the VIX has become a less reliable proxy for how much oil-driven risk remains priced into equities generally. Energy names on the TSX have moved on the commodity directly. The broader index has not moved with anything like the conviction the VIX level would suggest is warranted.