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Business 5 min read
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The Iran war’s big oil mystery: No one seems to want it
Analysis by 
David Goldman
3 hr ago
PUBLISHED Jul 21, 2026, 6:00 AM ET
Oil & gasInvestingAsiaChina
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Crude oil tankers, bulk carriers and vessels sit anchored around Qaboos Port on June 22, 2026, in Muscat, Oman.
Elke Scholiers/Getty Images
Two dominant forces balance the global oil market: supply and demand. The Iran war has broken both — one perhaps beyond repair.
Supply remains a complete mess. A historic crude glut turned into the worst-ever supply shock before another flood of oil entered the market in June. Now, an intensifying war has again closed off significant access to Persian Gulf oil, reinjecting chaos into the market.
Demand is somehow even more difficult to comprehend.
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The world has adapted to the supply shock during five months of war, learning how to cope without using as much oil as it had before the conflict. Hundreds of millions of barrels of oil finally escaped the Strait of Hormuz last month, only to find few willing buyers. Some Middle Eastern crude had to be heavily discounted before it found any takers.
The reasons why the world is turning up its nose at oil are complex.
The solution is far more complicated.
Demand’s big slump
In the three brief weeks that the Strait of Hormuz (mostly) reopened, something unexpected happened: More than 200 million barrels of oil locked inside the Persian Gulf quickly flooded out, but buyers just kind of shrugged their shoulders.
Qatar Energy and the United Arab Emirates’ Adnoc were forced to discount their oil by between $6 and $9 a barrel before finding Southeast Asian buyers, according to Homayoun Falakshahi, head of crude oil analysis at Kpler, which tracks maritime traffic and oil flows.
Motorists drive past an ADNOC Gas a subsidiary of the Abu Dhabi National Oil Company facility in Abu Dhabi on March 3, 2026.
Ryan Lim/AFP/Getty Images
More than 18 million barrels of non-Iranian oil that left the Strait of Hormuz currently remain on tankers outside the Persian Gulf awaiting a buyer — more than 2.5 times pre-war levels, Falakshahi said.
Iran has had even less luck selling oil than its neighbors. Iran got 70 million barrels of oil out of the strait in the weeks following its memorandum of understanding with the United States. Despite a temporary sanctions waiver from the United States, China was the only buyer willing to bite.
So Iran sent all of that oil toward China, by far its biggest customer before and during the war. But China wasn’t all that interested: It dramatically reduced its purchases of Iranian oil last month — from around 1.5 million barrels per day to 630,000 barrels per day, according to Kpler.
Overall, global oil demand stubbornly remains about 4 million barrels a day lower now than at the start of the war, according to JPMorgan.
To a large degree, demand has slumped because there’s nowhere to put the oil to good use. Refineries are maxed out, especially after Iran attacked 30 Middle Eastern refineries during the course of the war.
The China equation
Most explanations for the oil demand quagmire point in one direction: China. A decline in Chinese demand for the world’s oil has weighed significantly on global oil prices.
That’s a big reason why crude never approached its 2022 prices or the record set in 2008, despite an oil shock several orders of magnitude larger than either of those preceding crises.
China relies almost entirely on imports for oil. But its crude imports have fallen dramatically during the course of the war, tumbling below 8 million barrels per day from more than 12 million a day before the war, according to maritime data company Signal Ocean Research.
This aerial photo shows a tanker unloading imported crude oil at a terminal port in Qingdao, in China's eastern Shandong province on June 9, 2026.
AFP/Getty Images
Some of China’s oil-demand loss may be long-lasting. For example, demand for electric vehicles in the country exploded over the course of the war, and the number of EVs on the road surged by a third. China simultaneously placed strict restrictions on its refineries, limiting their output of gasoline, diesel and jet fuel.
But the China demand story is mostly one of extreme preparedness rather than the world’s second-largest economy turning its back on oil.
Ahead of the war, China built up its oil stockpiles and has been relying on that inventory for its crude needs — rather than imports — ever since. The country is drawing down its stockpiles at a rate of 2 million barrels per day but still has 1.9 billion barrels of oil left in its tanks, or 117 days’ worth of demand, according to Yulia Zhestkova Grigsby, senior commodities strategist at Goldman Sachs.
That’s why China’s “true” demand loss during the war is only about 1.2 million barrels per day — not the roughly 5 million that it stopped importing, Signal Ocean Research estimates.
When will demand recover?
Eventually, China will have to refill its tanks. When China starts importing again, that could add significant demand for oil — and boost prices.
The rest of the world will have to restock at some point, too, particularly the United States. The US Strategic Petroleum Reserve is at its lowest level since the Reagan administration began filling it in 1983. To counteract the supply shock, the International Energy Agency committed to drawing down global emergency inventories by a record 400 million barrels, creating a significant supply hole that will need to be filled.
It’s not clear when that demand recovery might happen — and no one seems to agree.
Gasoline and diesel prices are displayed at a gas station in Monrovia, California, on July 16, 2026.
Zeng Hui/Xinhua/Getty Images
Goldman Sachs believes it could happen soon, because Beijing has committed to maintaining strong inventory buffers. The International Energy Agency forecast oil demand will fall in 2026. OPEC thinks it will rise. JPMorgan thinks it will remain flat. Other industry experts are admitting defeat, noting demand is notoriously hard to measure and predict.
“The situation vis-a-vis the Strait of Hormuz is so volatile that my outlook changes almost daily alongside the news flow,” said Neil Atkinson, visiting fellow at the National Center for Energy Analytics.
It’s hard for potential buyers to know if it’s a good time to start purchasing oil again. Oil traffic through the strait has fallen dramatically again, and as oil prices keep moving higher while the situation in the Middle East intensifies every day. Brent crude briefly hit $90 a barrel Monday for the first time in over a month.
The on-again, off-again nature of the conflict could delay oil demand’s bounce-back even further.
“For demand to recover, I think that buyers would need to see a meaningful resolution between the US and Iran that provides confidence that it could be long-lasting,” said Kieran Tompkins, senior commodities economist at Capital Economics.
So countries are comfortable, for now, drawing down their own inventories. At least for as long as they last.
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