Commodity Context

Iran's closure of the Strait of Hormuz led to predictions of oil prices exceeding $150 per barrel, but prices remained below $100 due to China's sudden halving of oil imports. China's reduced demand, equivalent to 5 million barrels daily, offset supply losses and prevented catastrophic price surges, though its methods and sustainability remain unclear.

The article discusses the ongoing Iran war and the closure of the Strait of Hormuz, noting that oil prices have remained stable despite predictions of a spike. It introduces the TACO theory, which suggests President Trump will eventually end the conflict to avoid economic fallout, creating a dynamic equilibrium between market expectations and his decisions.

The article suggests that China's government may be releasing petroleum from strategic reserves into the market, potentially preventing a sharper rise in oil prices. This analysis is based on a recent Commodity Context newsletter by Rory Johnston.