Oil holds below $90 despite resumed US-Iran fighting

When the United States and Israel launched strikes against Iran on February 28, some of the world's top energy analysts warned that crude oil could surge to $200 per barrel or beyond. Nearly five months later, Brent crude traded at $88.22 on the morning of July 20 — less than half the feared peak — confounding the doomsday scenarios that dominated markets in March.fortune

The $200 Predictions That Never Materialized

In the weeks after the war began, forecasts of catastrophic price spikes proliferated. Macquarie Group strategists gave a 40% probability to oil reaching $200 per barrel if the conflict extended into summer. Wood Mackenzie said $200 was "not outside the realms of possibility". S&P Global's ↗ 1.01% head of energy suggested prices could "easily witness $200, $250" under sustained disruption. By mid-March, Brent had climbed past $100 as transit through the Strait of Hormuz ground to a near-halt.finance.yahoo+2

Yet oil never came close to those extremes. A combination of supply-side responses and demand destruction kept prices in check even as hostilities resumed this month after a three-month cease-fire collapsed.nytimes

Three Pillars of Price Containment

Record U.S. production has been the first counterweight. According to Reuters, American crude output hit 13.93 million barrels per day in April, an all-time high, as producers responded to elevated prices. Weekly data shows output has remained above 13.8 million bpd through early July.reuters+1

China's reduced imports have also eased pressure. Chinese seaborne crude arrivals fell to 7.8 million barrels per day in May — their lowest since at least 2017 — down more than 3 million bpd from April as Beijing declined to scramble for replacement barrels amid disrupted shipping routes.energyintel+1

Saudi Arabia's rapid pivot to its Red Sea infrastructure proved critical. Within days of the war's outbreak, Saudi Aramco began rerouting exports through its East-West pipeline to the port of Yanbu, where loading volumes tripled. The pipeline, capable of transporting up to 7 million bpd, is now the subject of expansion talks that could add another 1 to 2 million bpd of capacity.houseofsaud+2

The IEA Intervention

The International Energy Agency's March 11 decision to release 400 million barrels from member nations' strategic reserves — the largest coordinated release in history — provided a psychological and physical buffer during the war's most volatile early weeks. The United States contributed 172 million barrels from its own Strategic Petroleum Reserve. IEA Executive Director Fatih Birol said the release had a "strong impact" on markets at an "extremely critical phase".aljazeera+3

With fighting escalating again — U.S. strikes on Iran entered their tenth consecutive night on July 20 and the American death toll has reached 17 service members — oil markets remain volatile. But the structural factors that kept prices contained have so far proven more durable than the worst-case forecasts suggested.youtube+1