Oil prices dropped below $80 per barrel following the U.S.-Iran agreement to reopen the Strait of Hormuz and lift the maritime blockade. Traders are pricing out the war premium that had built up during recent tensions, though downside risks persist if the conflict in Lebanon escalates further.
China's crude throughput fell by 9.1% year-over-year to 12.7 million barrels per day, according to the country's National Bureau of Statistics. That marks one of the most substantial instances of demand destruction tied to the U.S.-Iran conflict. Refinery runs in the world's largest crude importer sank to their lowest since April 2022, depressed by negative refining margins.
The reopening of Hormuz restores a critical chokepoint through which roughly 20% of global oil passes, easing supply concerns that had supported prices during the blockade. The agreement removes an immediate risk to tanker traffic, but shipping security in the broader Persian Gulf region remains a watchpoint for traders.
Geopolitical uncertainty still hangs over the market. Any escalation between Israel and Hezbollah in Lebanon could reignite the risk premium, offsetting the gains from the Hormuz deal. Analysts warn that the region's volatility overshadows the demand-side weakness from China's industrial slowdown.
A counter_argument holds that China's steep refinery cuts may signal a more prolonged economic contraction, not just temporary demand destruction from the conflict. If Chinese consumption continues to fade, even stable supply through Hormuz may not keep prices from sliding further.