Five reasons why oil prices haven’t surged higher despite the Iran war

⦿ Executive Snapshot

• What: The ongoing Iran war has led to a significant oil supply disruption, yet oil prices have not surged as expected.
• Who: Key players involved include Morgan Stanley, JPMorgan, Saudi Aramco, Shell, and the International Energy Agency.
• Why it matters: Understanding the factors influencing oil prices is crucial for investors, especially in the context of global supply chain disruptions and geopolitical tensions.

⦿ Key Developments

• The market has lost nearly 1 billion barrels of oil in 10 weeks due to the closure of the Strait of Hormuz, according to Saudi Aramco and Shell's Q1 earnings calls.
• China’s seaborne crude imports have plummeted by nearly 10.9 million barrels per day, significantly impacting oil prices.
• The oil market entered 2026 with a significant surplus of 2 million barrels per day, contributing to price stability despite the disruption.
• U.S. net exports of oil and refined products surged by 5.5 million barrels per day during the same period, mitigating some of the supply loss.
• Refined products have experienced price increases of 60% to 120%, while crude oil prices have only risen by 40% from January to April.

⦿ Strategic Context

• Historically, oil prices have spiked during significant supply disruptions; however, current prices remain subdued despite the largest disruption in history.
• The market's expectation for a quick resolution to the conflict and reopening of the Strait of Hormuz has influenced current pricing dynamics.

⦿ Strategic Implications

• Immediate implications include a potential stabilization of oil prices around $100 per barrel, which could affect global economic recovery and inflation rates.
• Long-term, the shift in price dynamics towards refined products may alter investment strategies and trading behaviors in the oil market.

⦿ Risks & Constraints

• Regulatory risks related to geopolitical tensions and potential sanctions could impact trade flows and pricing mechanisms.
• The reliance on U.S. exports and the ability to replace lost Iranian supply creates vulnerabilities in the market structure.

⦿ Watchlist / Forward Signals

• Monitor any developments regarding U.S.-Iran negotiations that could lead to the reopening of the Strait of Hormuz and subsequent impacts on oil supply.
• Keep an eye on refined product price movements as indicators for potential shifts in crude oil pricing dynamics moving forward.