Iran War Triggers Oil Supply Shock and Slumps Global Demand

Intensifying fighting between the United States and Iran has repeatedly closed the Strait of Hormuz, the world’s most critical oil chokepoint. The disruption has produced a “worst-ever supply shock,” while global oil demand has fallen about 4 million barrels per day since the war began, according to JPMorgan.

CNN

The conflict began with U.S. strikes on Iranian military targets and has since seen Iran attack 30 Middle-Eastern refineries. A temporary U.S. sanctions waiver allowed Iran to ship roughly 70 million barrels through the strait, but China— Iran’s largest buyer—cut purchases from about 1.5 million barrels per day to 630,000 barrels per day.

CNBC

• More than 200 million barrels left the Persian Gulf in the three weeks the strait was largely reopened, yet buyers were scarce.

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• About 18 million barrels of non-Iranian oil remain on tankers outside the Gulf—2.5 times pre-war levels.

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• Qatar Energy and the UAE’s ADNOC discounted crude by $6-$9 a barrel to secure Southeast Asian buyers.

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• China’s crude imports fell from >12 million bpd before the war to <8 million bpd during the conflict; the country is drawing down its stockpiles at 2 million bpd, still holding 1.9 billion barrels.

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• The U.S. Strategic Petroleum Reserve is at its lowest level since 1983.

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• Brent crude rose to $91.51 a barrel, while West Texas Intermediate reached $84.64 a barrel.

Bloomberg

• The IEA announced a coordinated drawdown of global emergency stocks to offset the supply gap.

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• U.S. Defense Secretary Pete Hegseth estimated the war’s cost to the United States at $37.5 billion, up $8 billion from the previous public estimate.

CNBC

• Goldman Sachs projected Brent at $80 a barrel in the fourth quarter of 2026, with a base-case scenario of $75 a barrel in 2027.

Bloomberg

Forecasts for 2026 oil demand diverge: the IEA expects demand to fall, OPEC projects a rise, and JPMorgan foresees a flat outlook. Price projections also differ—Goldman’s base case holds Brent near $80 a barrel, yet analysts cite a potential rally above $120 a barrel if Hormuz remains closed. No source provides a definitive timeline for demand recovery, and the extent to which Chinese inventory drawdowns will translate into renewed imports remains uncertain.

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• “The situation vis-a-vis the Strait of Hormuz is so volatile that my outlook changes almost daily alongside the news flow,” — Neil Atkinson

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• “If a ceasefire does not materialize, and Hormuz remains largely closed while the Houthi threat to Red Sea shipping intensifies, the risk of a significant rebound in oil prices would be substantial,” — Jorge Leon, head of geopolitical analysis at Rystad

Bloomberg

Analysts agree that a durable resolution between the United States and Iran would be essential for demand to rebound. Until such a settlement occurs, countries are likely to continue drawing down strategic reserves, and any further escalation in the Gulf or Red Sea could push oil prices higher.

CNN