Analysts Predicted $200 Oil When the U.S. Went to War With Iran. Five Months Later, It Still Hasn’t Happened

Oil prices have remained surprisingly restrained despite nearly five months of war between the United States and Iran, defying early predictions that crude could soar to historic highs if fighting severely disrupted Middle East energy supplies.

When the conflict intensified at the end of February, many analysts warned that Brent crude could surge to between $150 and $200 per barrel if Iran succeeded in disrupting traffic through the Strait of Hormuz, the strategic waterway that carries roughly one-fifth of the world’s oil supply. Instead, Brent crude peaked at about $126 per barrel, well below the all-time record of nearly $147 reached in 2008, according to Reuters.

Prices averaged around $101 per barrel between the start of the conflict on February 28 and June 11, when President Donald Trump announced a halt to U.S. strikes against Iran. Although fighting later resumed, oil briefly fell back to around $70 per barrel in early July before recovering.

Several key factors have helped keep markets from spiraling higher despite the ongoing geopolitical uncertainty. One of the biggest surprises has come from China, the world’s largest crude oil importer. Rather than increasing purchases to build strategic reserves during the conflict, Chinese crude imports fell to their lowest levels in nearly a decade by June.

Demand weakened for several reasons. China curtailed fuel exports, accelerated the use of electric taxis instead of privately owned gasoline-powered vehicles, and its petrochemical industry reduced processing volumes. The unexpected slowdown in consumption significantly eased pressure on global oil markets at a time when traders had anticipated stronger demand.

The United States also played a major role in stabilizing global supplies. As the world’s largest oil producer, U.S. crude output climbed to a record 13.93 million barrels per day by April, offsetting some of the supply risks created by the conflict.

At the same time, Washington coordinated with the International Energy Agency to release a record 400 million barrels from the Strategic Petroleum Reserve in March, injecting additional supplies into the market and helping cushion any disruptions.

Political messaging from the White House also contributed to keeping prices under control. Throughout the conflict, Trump repeatedly announced possible diplomatic breakthroughs, ceasefires or agreements that could restore shipping through the Strait of Hormuz. Those statements frequently interrupted bullish momentum in oil markets, discouraging traders from making large bets that prices would continue climbing.

“Everybody is bullish now, but nobody is long,” Ilia Bouchouev of the Oxford Institute for Energy Studies told Reuters, describing a market in which investors expect higher prices but remain reluctant to take large positions because of the risk that a single political announcement could trigger a sharp selloff.

Reuters reported that hedge funds sharply reduced bullish positions in Brent crude earlier this month before increasing them again during the week ending July 14. Even after that increase, total bullish positions remain more than 50% below the six-year peak reached in late March.

Ole Hansen, Saxo Bank’s head of commodity strategy, told Reuters that markets are also experiencing “headline fatigue,” meaning each new announcement about military developments generates a smaller reaction than earlier in the conflict.

Meanwhile, oil shipments have adapted to the changing security situation. Although attacks periodically disrupted traffic through the Strait of Hormuz, Saudi Arabia significantly increased exports through its Red Sea terminal at Yanbu, providing an alternative route for crude shipments and reducing fears of a prolonged supply shock.

Hormuz traffic briefly resumed during June before declining again as hostilities intensified in July, but the alternative export capacity has helped reassure buyers that global supplies remain available.

Physical oil markets also remain relatively well supplied despite the conflict. According to Reuters, traders say prompt cargoes remain readily available, limiting the urgency for refiners to bid aggressively for crude.

North Sea Forties crude, one of the grades used to price the global Brent benchmark, has shifted from the record premium seen in April to trading at a discount. “There is a lot of prompt crude around for now,” veteran oil trader Adi Imsirovic told Reuters. “It may not last!”