MW Oil prices are defying a worst-case energy crisis - but workarounds won't last forever
By Claudia Assis
Three factors have kept crude futures from climbing to $200 a barrel, but the war's 'full impact' has yet to be felt, experts caution
The U.S. has stepped into the Hormuz breach to help meet global demand for crude and products such as gasoline and diesel.
Energy markets' worst nightmare has been playing out for more than 100 days, but one would hardly know it by looking at crude-oil futures.
Experts point at three main reasons for the steady prices but caution that a reckoning is not too far as the Strait of Hormuz remains at a standstill.
"The full impact has yet to be felt," said Antoine Halff, a fellow at Columbia University's Center on Global Energy Policy and a former chief oil analyst at the International Energy Agency.
"There's a lot of lag, and shock absorbers can only work for so long," Halff said. At the start of the conflict with Iran, he suggested the war would leave oil's record run of nearly $150 a barrel back in 2008 "in the dust."
Crude futures (CL00) (BRN00) have remained steady and under $100 for the most part, apart from a few sessions in April in which prices hovered around or just above $110 a barrel. Prices even notched big losses in May, their biggest monthly retreat since 2020.
Part of Halff's job at the IEA in the 2010s was to run emergency preparedness meetings with member-country delegates, he said. Every few years, the EIA would go over scenarios of oil jolts with varying degrees of severity in order to train the delegates on how to deal with their country's strategic reserves, he said.
Their most severe scenario was the current Hormuz reality, whereby the strait, the former conduit of about a fifth of the world's crude and crude products, essentially closed.
"This was the worst thing we could come up with. We kind of assumed it was not possible, that the strait was kind of too big to fail," Halff said.
Three main workarounds have helped energy markets avoid deeper problems from a pricing perspective.
For one, the markets were oversupplied in 2025, which resulted in fat stockpiles that are still relatively plentiful, albeit declining.
Plus, additional crude supplies in the form of exports coming mostly from the U.S. and also from countries in South America and Africa are softening the blow.
And the world is also making do with less oil - Asian countries, particularly China, curbed energy imports and are consuming less.
Inventories are holding steady - so far
Markets have no way to adequately price the full impact of the crisis "since its extent and duration are unknowable," analysts at Piper Sandler said in a recent note.
The on-again, off-again nature of negotiations about a lasting cease-fire in the Gulf has also made calculations harder. Hopes for a deal run high before fizzling, so markets have been reluctant to discount longer-lasting disruptions, Morgan Stanley analysts said.
Prediction markets, however, assign very little probability to Hormuz reopening by the end of this month - an 11% chance on Polymarket. A bet that it reopens by July 31 shifted to mostly "no" by late May; current odds are tilted in favor of a reopening by December.
Inventories of crude are the least imperiled, but there's more concern about inventories for products such as gasoline and diesel. U.S. refiners have sought to take advantage of that by exporting more of their products, with a particular focus in recent weeks on jet fuel.
China in particular is sitting on massive reserves, which means that country can afford to stay completely out of talks between the U.S. and Iran.
The U.S. Energy Information Administration calculates that China's strategic reserves stood at about 1.4 billion barrels of oil late last year. Sarah Emerson, president of consulting firm ESAI Energy and an energy expert for four decades, has estimated that China has a total of about 3 billion barrels in reserve, including commercial stocks at the hands of its state-controlled energy companies.
China also cut demand significantly. More on that soon.
Additional supplies from the U.S. and elsewhere
The U.S. stepped up exports of crude and also of products such as diesel, gasoline and jet fuels, with refineries running at the top of their capacity. Other countries such as Brazil, Venezuela and Angola also stepped up.
Brazil's output in the first four months of the year, for example, rose by 800,000 barrels a day relative to a year before. That's about 200,000 barrels a day above a forecast by analysts at J.P. Morgan.
Some ships have also transited Hormuz undetected: There have been reports that some ships have turned off their GPS-like signals and transited incognito, either for safety or because they are part of so-called shadow fleets.
Then there's oil from Saudi Arabia and the United Arab Emirates, which are sending some of their production through pipelines; the UAE recently sped up a pipeline expansion as a way to be less dependent on Hormuz traffic.
Related: Many big oil tankers remain stuck in the Strait of Hormuz - and may not return once they escape
The world is also tapping other energy sources. According to Rystad Energy, there's a "significant near-term surge" in demand for coal in Asia. That's not a policy reversal but a supply stopgap as Asia grapples with the loss of liquified natural gas from Qatar, its main source of LNG.
The world is not using as much oil
China has absorbed a big share of the adjustments. According to the J.P. Morgan analysts, it slashed its crude imports by 3.8 million barrels a day compared with year-ago levels - that's roughly 74% of the remaining decline in global crude imports relative to the 2025 average. China is "effectively taking the hit and allowing other countries to stabilize their intake," the analysts said.
Here's a chart of China's crude imports from 2021 through this May of this year:
Source: Kpler, J.P. Morgan Commodities Research
China seems to be opting to let imports slide and use up its inventories, the analysts at Morgan Stanley said.
And it's not just China, they said - heavyweight oil importers such as Japan, South Korea, India and Singapore also have cut net seaborne imports by a further 3.9 million or so barrels a day, the Morgan Stanley analysts said.
Several other Asian countries that are heavy oil importers enacted energy-saving measures early on. These include shorter workweeks and reduced business hours.
Then there are also contributions from technologies that are relatively new, Columbia University's Halff said.
Global energy markets are much more efficient than they were some six years ago, he said. Satellite technology, for instance, is being used to grasp global crude inventories "in great detail," he said. So traders dealing with physical crude barrels can quickly identify imbalances and reallocate supplies quickly.
Satellite, sensors and other technology not existent in 2020 are tracking inventories in real time and also keeping tabs on tanker movements and flows.
"Six years ago it was all guesswork," Halff said. "More or less educated guesses, but they were guesses."
-Claudia Assis
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 09, 2026 12:45 ET (16:45 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments