Hormuz Tensions Fail to Spark Oil Price Spike as Supply Surges

Oil prices have not spiked despite ongoing tensions in the Strait of Hormuz, and experts are pointing to several factors contributing to this phenomenon. According to JPMorgan's Natasha Kaneva, inventory draws were smaller than anticipated, China demand cuts, and supply responded faster and at a larger scale than expected.

Kaneva attributes the accelerated production growth across multiple regions to the incentive to maximize output, which proved overwhelming for producers. In contrast, Goldman Sachs notes that the physical oil market is getting tighter due to lower flows from the Persian Gulf and the Red Sea, lower Russian oil exports, and stronger Asian imports.

The International Energy Agency (IEA) predicts a decline in world oil demand by 1.6 million barrels per day in 2026 but expects demand growth to recover in the fourth quarter of this year and reach 2.4 million barrels per day in 2027.