Crude Prices Defy Expectations Amid Geopolitical Tensions

Global crude prices have remained remarkably stable despite the largest oil supply shock in decades. According to Kelly Xu, a Commodity & Energy Strategist at Alpine Macro, this stability is due to four critical market buffers that cushioned the impact of geopolitical oil spikes.

The first buffer was massive demand destruction, which helped rebalance the global energy market and shield major import-dependent economies like India from price surges. Non-Gulf supply growth also played a crucial role in offsetting lost volumes from Gulf producers, with output projected to grow by about 0.6 mb/d in 2026.

Alternative export routes and greater shipping flexibility further reduced the market impact of disruptions through the Strait of Hormuz. Key measures included pipeline systems that bypassed the Strait and shipping arrangements like ship-to-ship transfers in the Gulf of Oman.

Inventories also provided a source of market flexibility, with strategic stock releases from the US and other OECD countries injecting a significant volume of barrels into the market during the disruption.