Global oil markets have avoided catastrophic price spikes six months into the war in Iran, according to energy analysts and government data. While geopolitical disruptions in the Middle East continue to threaten maritime routes like the Strait of Hormuz, benchmark prices remain well below dire initial projections made when the conflict began in late February.
Strategic Reserves and China’s Import Cuts Shield Global Markets
When the United States and Israel began their bombardment of Iran, energy experts warned that crude prices could more than double during a protracted conflict. Instead, those worst-case predictions failed to materialize. According to U.S. Energy Information Administration estimates, Beijing spent years amassing a strategic reserve of approximately 1.4 billion barrels by the end of last year. This stockpile allowed China—the world’s second-biggest oil consumer and Iran’s top buyer—to slash crude imports sharply once Tehran effectively closed the Strait of Hormuz.
China’s crude imports averaged just 8.1 million barrels per day in the second quarter, marking a 32% drop compared to the first three months of the year, according to U.S. data. “They didn’t panic and by turning to their inventories they kept the price down for everybody,” said Michael Lynch, president of Strategic Energy and Economic Research. Retired U.S. Navy Rear Adm. Mark Montgomery, an analyst at the Foundation for Defense of Democracies, noted that China achieved in ten years what took the United States twenty-five years after the 1973 oil crisis to accomplish in building a strategic reserve.
Analysts observe that Beijing’s accumulation of oil was initially driven by contingency planning for potential military action regarding Taiwan. However, utilizing those reserves helped soften upward price pressures for the United States, Europe, and the wider global economy. “We’ve been free-riding off Beijing in a weird way,” said Rosemary Kelanic, director of the Middle East program at Defense Priorities. “China’s doing it because they understand that they’re on the train that Trump is driving off a cliff.”
Ongoing Supply Disruptions and Price Forecasts
Despite China’s inventory buffer, energy markets remain vulnerable as regional hostilities persist. Attacks by Iran-backed militias this month forced Saudi Arabia to temporarily shut down a critical pipeline transporting crude across the kingdom to Red Sea ports. Furthermore, Yemen-based Houthi rebels seized two strategic islands in the southern Red Sea, increasing their capacity to disrupt maritime traffic. Planned discussions among Gulf nations to reopen the Strait of Hormuz were put on hold earlier this week.
Ahead of a state visit to Washington by Chinese President Xi Jinping, President Donald Trump is scheduled to meet Tuesday with leaders of the Gulf Cooperation Council in New York on the sidelines of the United Nations General Assembly. The diplomatic meetings come as Bank of America analysts forecast Brent crude to average $83 a barrel for the second half of the year, assuming persistent disruptions in the Strait of Hormuz gradually ease. However, those analysts warned that escalating violence could push prices to between $95 and $120 a barrel, while severe infrastructure damage could trigger spikes of up to $150 a barrel. Brent crude averaged roughly $69 per barrel last year, briefly touched $126 in late April, and currently hovers around $100.
FAQ Section
Why did oil prices not double when the war in Iran started?
Prices stayed below dire projections largely because China utilized its 1.4-billion-barrel strategic petroleum reserve to dramatically cut its crude imports, easing global demand.
How much did China reduce its oil imports?
China’s crude imports dropped to an average of 8.1 million barrels per day in the second quarter, representing a 32% decrease from the first three months of the year, according to U.S. data.
What are current oil price forecasts if maritime disruptions worsen?
Bank of America analysts project prices could reach $95 to $120 a barrel if violence escalates, with potential spikes up to $150 a barrel if major energy infrastructure sustains damage.
Why did China build such a large oil stockpile?
Energy experts indicate Beijing built its massive reserves primarily as contingency planning for potential military action regarding Taiwan, though the stockpile ultimately helped the country weather the current Middle East conflict.
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