Yom Kippur War and Oil Shock

In October 1973, Egypt and Syria launched a coordinated surprise attack on Israel, beginning the fourth Arab-Israeli war. The fighting lasted only about three weeks, but its economic aftershock was far larger. When Arab oil producers imposed an embargo on countries seen as supporting Israel, energy prices surged and the world discovered how dependent industrial economies had become on Middle Eastern oil.

The roots of the war lay in the Six-Day War of 1967, in which Israel captured the Sinai Peninsula from Egypt and the Golan Heights from Syria. Diplomacy over the occupied territories went nowhere. After Anwar Sadat became Egyptian president in 1970, he grew convinced that only a limited military action could break the stalemate and force negotiations. Egypt and Syria planned their offensive in secret, and Israeli leaders, confident in their military superiority, underestimated the likelihood of an attack.

The assault began on 6 October 1973, which was Yom Kippur, the holiest day in the Jewish calendar, and fell during the Muslim month of Ramadan. Egyptian forces crossed the Suez Canal and overran Israeli positions along its eastern bank, while Syrian troops pushed into the Golan Heights. Israel was initially caught off balance and suffered heavy losses. It then mobilized its reserves, halted the Syrian advance, and counterattacked, eventually crossing the canal to the Egyptian side. The United States resupplied Israel, while the Soviet Union backed Egypt and Syria, and the two superpowers came close to a dangerous confrontation before a ceasefire took hold in late October.

Meanwhile, the Arab members of the Organization of Arab Petroleum Exporting Countries cut production and announced an embargo aimed chiefly at the United States and the Netherlands. The wider Organization of the Petroleum Exporting Countries also raised the price it charged for crude. Within months, oil costs had roughly quadrupled. Motorists in the West faced shortages and long lines at filling stations, and governments introduced rationing, speed limits, and other conservation measures.

The consequences were wide-ranging. The price shock contributed to a period of inflation and slow growth known as stagflation, and it pushed Western countries toward fuel efficiency, new domestic oil fields, nuclear power, and strategic petroleum reserves. It also raised the political and financial standing of oil-producing states. Diplomatically, the war opened the way to negotiations: U.S. Secretary of State Henry Kissinger brokered disengagement agreements, and Sadat's willingness to treat with Israel eventually led to the Camp David Accords of 1978 and the Egypt-Israel peace treaty of 1979. Historians still debate how much the embargo alone, as opposed to broader market forces, drove the price increases, but the year 1973 remains a turning point in the politics of energy.