China's Oil Import Cuts Keep Brent Below $100 as Hormuz Standoff Drags On
Five months into the US-Iran war, a sharp pullback in Chinese crude purchases has blunted a supply shock that analysts once thought would push oil past $200.
ICE Brent crude front-month settled Friday (2026-07-31) at $91.04 a barrel, more than $35 below the $126 peak recorded during the conflict and a long way from the $200-plus forecasts circulating when war between Iran and Israel broke out on February 28. The gap between prediction and outcome has a primary explanation: China stopped buying.8,5
From the start of hostilities on February 28 through June 11, ICE Brent averaged just $101 a barrel, according to TBSNews — below the $147 all-time high set in 2008 and within the range many analysts once called a floor. Brent peaked around $126. The ceiling held because physical supply, though stressed, was never stripped bare.8
China sharply cut crude imports after the conflict began, removing a block of demand that would otherwise have amplified any supply constraint. The decision was pragmatic: around 50% of China's imported crude and 36% of its total crude supply pass through the Strait of Hormuz every year, according to a CSIS study cited by News18. When military risk to the strait surged, Chinese buyers pulled back rather than chase expensive prompt cargoes.5,7
Beijing's structural buffers absorbed the disruption more cleanly than markets had priced in. China holds a strategic petroleum reserve estimated at 1.2 to 1.4 billion barrels — enough to cover roughly four months of net crude imports — reducing the urgency to compete for spot barrels. Coal accounts for approximately 56% of primary energy consumption and 58% of electricity generation, insulating the power sector from oil-price spikes. Wind, solar and nuclear contributed 22% of primary energy in 2024, giving policymakers flexibility when crude costs climbed.7,3
The supply side added its own relief. US production hit a record 13.93 million barrels per day by April, and the International Energy Agency coordinated a record 400 million-barrel strategic reserve release in March, buffering a market already stretched by route disruptions.8
Traders say physical cargoes have remained plentiful throughout. Ample supply of prompt physical oil has limited price reactions to each military escalation, market participants said. Prompt availability has repeatedly capped rallies that geopolitical headlines would otherwise sustain.8,6
Speculative positioning reflects the diminished conviction on the upside. Long oil positions stood at approximately $14.8 billion as of Monday (2026-07-20) — more than 50% below the six-year peak reached in late March, suggesting systematic funds have materially reduced exposure since the first shock.8
The conflict has produced sharp single-session moves. Brent fell 17% on Tuesday (2026-05-19) to trade below $80 a barrel, then recovered to near $90. Oil prices spiked 5% on Monday (2026-06-08), only to drop more than 3% the following day. The swings show how sensitive the market remains to any credible signal about the strait.1,6
Bjarne Schieldrop, chief commodities analyst at SEB, told the Guardian: "It has become quite clear now that this is the biggest bluff in history and it has gone horribly wrong."2
The equilibrium that has held prices below $100 depends on conditions that could shift fast. US President Donald Trump has said he is looking to make a "final determination" on extending the Iran ceasefire and reopening the Strait of Hormuz, according to the Indian Express. A breakdown in that process would reprice the supply assumptions embedded in the current ICE Brent level. China's exposure runs deeper than crude: nearly 30% of its imported natural gas also transits Hormuz, according to the CSIS study cited by News18, though that figure represents only about 7% of overall gas supply given domestic production and alternative import routes. Should Chinese buyers return to the market at scale while the strait remains under military pressure, the demand-side brake that has defined five months of oil trading disappears.4,7