Brent crude closed at 106.60 on September 24, up 8.64% in a single session, and the VIX rose 3.23%. The next day Brent gave back 7.30% and the VIX fell 5.11% to 14.87, a lower close than the 15.18 recorded the evening before the spike began.
That quiet is the behavioural story. The Strait of Hormuz has been effectively closed since the war began on February 28, and the IMF PortWatch tracker recorded one transit on September 27 against a pre-crisis baseline of 85 a day. The Federal Reserve raised its target range to 3.75 to 4.00% on September 16, its first increase since 2023. Investors have absorbed each shock, and the pricing of fear has adapted with them.
Habituation Is Setting the Price of Fear
Psychologists use the term habituation for the fading of a response to a stimulus that repeats without changing in kind. Applied to markets, it describes a risk gauge that stops reacting to a threat that is neither new nor resolved. Tversky and Kahneman, publishing in 1974, showed that people judge likelihood by how easily examples come to mind, the availability heuristic. After seven months of Hormuz headlines, a tanker strike is no longer a vivid new example. It is background.
The VIX is a market price, not a survey, so this is not a claim about any single investor. It is a claim about the margin. The index did flinch on September 10, rising 8.38% to the sample high of 17.84 as Brent closed at 107.63, up 6.34%. Since then, three larger oil moves have arrived: a 7.35% fall on September 21, an 8.64% rise on September 24 and a 7.30% fall on September 25. The VIX changed by 0.41%, 3.23% and 5.11% in absolute terms on those days, and none of them produced a new high.
The VIX has held between 14.21 and 17.84 across 21 sessions while Brent closed between 95.41 and 108.75, and the sessions with the largest oil moves left the index within two points of its 15.89 average.
Brent closed at 106.60 on Sep 24 (+8.64%) and 98.82 on Sep 25 (-7.30%), while the VIX moved +3.23% and -5.11% on the same sessions. The Sep 16 FOMC raised the federal funds target range to 3.75 to 4.00%, the first increase since 2023.
The Consumer Sees the Same Headlines Differently
The University of Michigan consumer sentiment index stood at 48.1 in its September reading, a four-month low reported on September 28. The VIX closed October 6 at 15.01, below its 21-session average. In Canada, the S&P/TSX 60 VIX fell 4.77% to 12.78 on October 6, a six-month low, according to BBN Times, while the TSX Composite remained about 4% below its record of 37,069.11 set on August 26.
Paul Slovic and colleagues, writing in 2002, described the affect heuristic: people judge risk by the feeling an image evokes rather than by calculation. A household that sees gasoline up 22.8% from a year earlier, the figure in the Statistics Canada August consumer price index, receives risk information at the pump. An investor receives it through a statement, and TSX gains of 17.45% over 12 months have kept that statement in positive territory. The two readings are measuring different populations, which is why they can both be true at once.
Myopic Loss Aversion Meets a Crowded Calendar
Shlomo Benartzi and Richard Thaler, in 1995, named myopic loss aversion: the combination of loss aversion, identified by Kahneman and Tversky in 1979, with frequent evaluation of results. Tversky and Kahneman estimated in 1992 that a loss weighs about twice as much as an equal gain. A volatility reading that has stayed under 18 for 21 sessions gives that calculation very little to work with, and so it can stay dormant until a date forces it awake.
The calendar holds several such dates. The Canadian Labour Force Survey for September arrives Friday, October 9, at 8:30 am ET. The Bank of Canada, whose policy rate has stood at 2.25% since a seventh straight hold on September 2, decides on October 28 at 9:45 am ET with a Monetary Policy Report, and the Federal Reserve decides the same day at 2:00 pm ET. Scotiabank economist Derek Holt wrote on September 10 that he expected the Bank of Canada to raise rates by a cumulative 75 basis points between the fourth quarter and the first quarter of 2027.
Terrance Odean, studying 10,000 discount brokerage accounts in 1998, found that investors realized gains about 1.5 times as often as losses, the disposition effect. A calm stretch followed by a decision day is the setting in which that asymmetry is tested. A VIX of 15.01 measures how recently markets reacted, not how much risk remains, and the distance between a strait that handled one transit on September 27 and a volatility index near its monthly average is the distance habituation travels.