Oil prices have remained below $100 a barrel more than three months after the Strait of Hormuz was effectively blocked, causing the worst supply shock in modern history. The waterway closure cut over 10 million barrels a day of Middle Eastern supply, but crude prices have defied forecasts of reaching $200 a barrel, according to fortune.com.
Several factors have helped mitigate the shock, including record U.S. crude exports, a sharp slowdown in Chinese oil demand, and some crude still passing through the strait. China, the world’s largest importer, reduced inbound shipments by nearly 40% in May compared to last year’s average, offsetting between a third and a fifth of the lost barrels. Additionally, a pre-war surplus has cushioned the market impact, President Donald Trump noted.
This supply-demand dynamic contrasts with earlier expectations of severe price spikes. The U.S. has become the world’s largest crude exporter, helping to fill the gap left by Middle Eastern supply disruptions. The unexpected drop in Chinese demand, combined with alternative supply routes and stockpiles, has prevented prices from soaring despite the scale of the disruption.
Market watchers are now focused on how long these buffers can sustain the current price levels and when normal flows might resume through the Strait of Hormuz. The future trajectory of oil prices remains a key uncertainty for the global economy, with prices currently around $96 a barrel, according to fortune.com.