NextFin News - Since the outbreak of the U.S.-Iran war on February 28, 2026, global crude oil supplies have plunged by 14%, primarily due to disruptions around the Strait of Hormuz, a critical chokepoint for roughly one-fifth of the world's seaborne oil. Despite this significant supply shock, oil prices have remained below $100 per barrel, a phenomenon largely attributed to China's drastic reduction in crude imports. According to J.P. Morgan analysts, China cut its crude imports from 11.7 million barrels per day in February to just under 9 million barrels per day by late May, accounting for approximately 74% of the global decline in crude imports. This disproportionate adjustment has been a key factor in keeping prices remarkably stable four months into the conflict.
Societe Generale's commodity research team, led by Mike Haigh, highlights China's import cut as one of the largest offsets to the supply shock, second only to Saudi Arabia's rerouting of flows and surpassing coordinated strategic petroleum reserve (SPR) releases by the U.S., Europe, and Japan. The French bank's analysts note that other mitigating factors include strategic inventory releases, increased output from countries such as Brazil and Venezuela, and reassuring signals from Washington. These combined efforts have prevented a repeat of the 1973 OPEC embargo crisis, which saw a 7% supply cut but a 134% price surge, compared to the current 14% supply loss and a more modest 30% price increase.
Rory Green, head of emerging markets macro and strategy at GlobalData TS Lombard, attributes part of China's ability to reduce imports to its rapid electrification of energy production and transportation since 2022, which has shifted the country from an energy deficit to a substantial surplus. Green's analysis, published in late May, underscores China's evolving energy landscape as a critical factor in global oil market dynamics.
However, Societe Generale cautions that the current price cushioning effect is unlikely to persist. As global inventories continue to deplete and strategic reserves require rebuilding, the market will likely face upward pressure on prices. This view reflects a scenario-based assessment rather than a definitive forecast, emphasizing the contingent nature of future price movements on geopolitical developments and supply-demand balances.
It is important to note that this perspective primarily represents Societe Generale's analysis and does not necessarily reflect a consensus among all market participants. Other analysts point to the potential for further supply disruptions or shifts in demand patterns that could alter the trajectory of oil prices. The evolving conflict in the Middle East, including recent exchanges of strikes between Israel and Iran, adds layers of uncertainty to the market outlook.
In sum, while China's import reductions have so far played a crucial role in moderating global oil prices amid geopolitical turmoil, the sustainability of this effect remains uncertain. Market participants should remain vigilant to changes in inventory levels, strategic reserve policies, and geopolitical tensions that could drive prices beyond current thresholds.
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