Brent crude opened the July 13 session up nearly 4% to $78.70 per barrel, yet that gain tells only part of the story. Despite renewed escalation between the United States and Iran, oil prices remain far below the $110-per-barrel peak seen in May — and the gap between geopolitical alarm and market reality is widening.
Market Adaptation Dulls the Shock
Early in the conflict, the threat of a full Hormuz closure sent shockwaves through energy markets. That dynamic has largely faded. Jim Burkhard, head of crude oil research at S&P Global Energy, explains that the ongoing grey-zone confrontation between Washington and Tehran — skirmishes fought primarily at sea — no longer surprises traders. Burkhard notes that events now move prices "a few dollars up or down," a far cry from the shock of Iran's initial, unprecedented closure of the strait in early March.
Tamas Varga of PVM Oil Associates concurs, arguing that Gulf producers have adapted with remarkable efficiency. Alternative export routes, including overland pipelines and unreported shipments, have trimmed the effective daily supply shortfall to roughly 12.2 million barrels — still significant, but a fraction of the disruption feared at the conflict's outset.
A Supply Gap That Keeps Shrinking
Gulf export flows have recovered meaningfully. According to AP data cited by VnExpress, crude leaving the Gulf region — through Hormuz and via bypass routes — now runs at approximately 14 million barrels per day, up sharply from the wartime trough, though still below the pre-war level of 20 million barrels.
Producers outside the Gulf have moved quickly to fill the gap. The United States released strategic reserves and granted sanctions waivers on Russian and Iranian barrels, while non-Gulf producers ramped output. Together, these measures added roughly 9.1 million barrels per day to available supply, compressing the real-world deficit to around 3.1 million barrels per day. That residual gap is manageable by historical standards and has anchored price expectations.
China's Demand Withdrawal Changes the Math
The more structural force capping prices is demand, not supply. China cut crude imports by 30% year-on-year in May, according to Dutch bank ING, and tracking data suggests June figures fell even further. Burkhard estimates that China's pullback alone removed close to 6 million barrels per day from international purchasing — a volume that dwarfs the supply shortfall that remains.
Two forces are at work in Beijing. First, Chinese buyers deliberately stepped back from costly spot purchases when prices spiked in spring. Second, the structural shift toward electric vehicles and fuel-efficient transport has permanently reduced the country's gasoline and diesel appetite. Daniel Sternoff, a senior researcher at Columbia University's Center on Global Energy Policy, estimates that Chinese road-fuel demand has dropped by 500,000 to 600,000 barrels per day since the crisis began — "a very significant number."
ING analysts flag China's re-entry timing as "the greatest uncertainty" for the market, noting that a prolonged absence could push prices lower even if Middle East tensions persist.
IEA Flags a Potential Glut
The International Energy Agency now projects that global oil demand will fall for the first time since the 2020 pandemic — declining by roughly one million barrels per day. Toril Bosoni, the IEA's head of oil markets, warns that markets could tip into surplus as early as late 2025, as non-Gulf output rises and consumption disappoints. That oversupply scenario, if realised, would allow governments and companies to rebuild strategic reserves drawn down during the crisis.
The IEA's base case does carry a critical assumption: that tanker flows through Hormuz gradually recover, enabling idled wells and refineries to restart. Bosoni acknowledged the recovery will not be "quick or linear" given ongoing uncertainty over the strait's operational status.
Price Forecasts Reflect a Careful Equilibrium
ING's current projections put Brent at an average of $80 per barrel in the third quarter, slipping to $74 in the fourth — assuming no fresh major disruption to Hormuz flows. That forecast implies markets are pricing in a cautious but ultimately manageable resolution rather than a sustained supply crisis.
Burkhard offers a more sobering caveat. The contest for effective control of the Hormuz strait between US naval forces and Iran remains unresolved, making full restoration of the shipping lane unlikely in the near term. "The future of the Strait of Hormuz is perhaps more uncertain now than when the conflict began," he said — a reminder that the current price equilibrium rests on assumptions that could shift quickly.
Investor Takeaway
For energy traders and macro investors tracking the Mekong region, the oil price dynamic carries direct implications. Vietnam, as a net oil importer dependent on Middle Eastern crude for refinery feedstock at Nghi Son and Binh Son, benefits from the current price moderation. Every dollar Brent stays below $85 eases pressure on the trade balance and reduces fuel subsidy costs. The key variables to watch are China's re-entry into spot crude markets and any fresh disruption to Hormuz transit — either could reprice the barrel sharply and flow through quickly into Vietnam's import bill and broader regional inflation.
