Four months into the U.S.-Iran war and oil still hasn’t hit the catastrophic prices many analysts feared. Benchmark prices have swung wildly since hostilities began February 28, with North Sea Dated reaching a high of $144 per barrel before falling below $100 and rebounding again. The dreaded $200-per-barrel scenario has not materialized and understanding why tells you quite a bit about how global energy markets work under real pressure.
The single biggest reason prices haven’t spiraled is one few predicted: China pulling back from the market in a significant way. Beijing cut crude imports from 11.7 million barrels a day in February to just under 9 million by late May, a reduction that J.P. Morgan analysts say accounts for roughly 74% of the total decline in global crude imports, describing it as disproportionate and crediting it with keeping prices remarkably calm. China quietly absorbed the bulk of the world’s need to adjust, and markets barely had to do the heavy lifting themselves.
Martijn Rats, commodities strategist at Morgan Stanley, told clients that China’s import reduction is the single most important component explaining why oil prices are not higher. Rory Green, head of emerging markets macro and strategy at GlobalData TS Lombard, points to a structural reason: China’s rapid electrification of energy and transportation since 2022 has shifted the country toward a substantial energy surplus, meaning it can absorb a supply squeeze with far less economic pain than before.
For context on how unusual this market reaction has been, Société Générale offers a striking comparison. The roughly 14% loss in global crude supply tied to the Hormuz closure has pushed prices about 30% higher. During the 1973 OPEC embargo, a 7% supply cut sent prices soaring 134%. Multiple factors have softened the blow this time, including strategic reserve releases and increased output from Brazil and Venezuela. But Société Générale analysts, led by Mike Haigh, head of FIC and commodity research, identified China’s import cuts as the second-largest single offset to the shock, behind only Saudi Arabia rerouting its oil flows.
Then came Monday’s escalation. Iran launched ballistic missiles at Israel on Sunday, the first direct attack since the April ceasefire, sending Brent crude up roughly 3.5% to near $97 per barrel and West Texas Intermediate rising to around $94. The exchange threatens to derail President Trump’s push for a new 60-day ceasefire intended to open the door to broader negotiations.
Analysts are now split on what comes next. J.P. Morgan’s base case, assuming a June reopening of the Strait, puts Brent near $100 for the rest of 2026, with a longer closure adding $5 per barrel in the third quarter and $15 in the fourth. Fitch takes a more optimistic view, arguing that a late July reopening could cause Brent to fall sharply to an average of $70 from September, calling the current spike a temporary logistical supply shock rather than lasting production damage. The U.S. Energy Information Administration projects prices declining to an average of $89 per barrel by the fourth quarter of 2026, easing further to $79 in 2027, assuming flows gradually resume, though a one-month delay in reopening could push prices more than $20 per barrel above that forecast in the near term.
The longer-term picture carries a structural warning. Goldman Sachs argues that even after the Strait reopens, prices are unlikely to fall quickly back to pre-war levels, because the shock has forced markets to reprice the concentration of oil production in the Persian Gulf, embedding a risk premium into long-dated oil forwards. Société Générale adds that strategic reserves will need to be rebuilt and that new oil production requires stronger returns to justify investment, concluding that the longer-term equilibrium price for oil is likely higher than what forward markets currently imply.
The conflict has reached its 100th day without the economic collapse early forecasters warned of, largely because of China’s structural energy shift doing the quiet work of rebalancing a fractured market. Whether that cushion holds depends on a strait barely 33 kilometres wide, and on the conversations happening around it right now.
