The US and China Are ‘Shielding’ the World From Iran War Oil Spikes

Oil prices are high, but they haven’t quite gone parabolic since the Iran war began.

Morgan Stanley strategists said there’s structural support from the US and China that’s helped anchor oil prices and prevent them from rising to levels predicted in the worst case scenarios. Changes in the two world powers oil trading activity has offered a cushion to the global economy.

“The rise in seaborne exports from the US and decline in imports into China has absorbed 9.3 mb/d of the 12.3 mb/d YoY Middle East decline, shielding the rest of the world,” the strategists said.

JPMorgan Chase CEO Jamie Dimon said on Tuesday that the changes in US exports and China’s imports may be way the Iran war “hasn’t been a severe thing” for the oil prices.

Dimon noted that the impacts of the conflict get “a little more serious every day,” but that the day that it “becomes a disaster” has been pushed further down the line.

Morgan Stanley reported the oil market has lost nearly one billion barrels of supply due to the war, the firm said, noting that even if the Strait of Hormuz reopened tomorrow, the market is set to lose another billion barrels in the time it takes to normalize the supply chain.

“That this is the largest oil supply disruption in the history of the oil market is neither an exaggeration nor controversial,” the firm underlined.

Brent crude traded around $108 per barrel on Tuesday, 73 days since the first US-Israel strikes on Iran, while WTI oil settled near $102.

Oil prices are well above prewar levels, but have pulled back from their recent peaks.

Prices during the war have been relatively subdued compared to previous spikes driven by less significant disruptions to global oil flows. Morgan Stanley said prices aren’t high when examined in historic terms.

“Brent traded above $100/b throughout the four-year stretch from 2011 to 2014, and reached $130/b in March 2022 on a far smaller disruption than the one currently underway.

They called out the oil price moves in 2022 when Russia invaded Ukraine. “Oil prices have risen, but still failed to reach the levels of 2022 – a much smaller disruption,” the analysts wrote.

The most obvious explanations for muted price increases in Morgan Stanley’s view are the market’s strong prewar oil surplus and investors pricing in a resolution coming shortly.

The strategists say the the “more revealing” reasons behind the relatively muted high oil prices despite the historic market disruption of the ongoing Iran war are driven by trading activity from two global powers: the US and China.

“The rise in seaborne exports from the US and decline in imports into China has absorbed 9.3 mb/d of the 12.3 mb/d YoY Middle East decline, shielding the rest of the world,” they wrote.

“Oil-on-water is rising again, not falling,” the strategist noted.

Morgan Stanley examined tanker tracking data and found that the global seaborne balance has actually loosened recently thanks to the import and export activity in the US and China.

The US adds barrels to the market, boosting oil exports

Outside the Middle East, oil producing countries led by the US have boosted seaborne exports more significantly than expected.

The strategists examined exports from April 8 to May 8 in 2026 compared to the same month period in 2025. They found that net exports from Saudi Arabia, UAE, Kuwait, Iraq, Iran, Qatar, and Bahrain saw a 12.3 million barrel per day decline.

But, this loss has been partially offset but increased exports from other producers exporting around 5.5 million barrels per day in the same period.

This effort has been led by the US, which alone accounts for 3.8 million barrels per day increase.

“The offset on the export side is overwhelmingly a single-country story: the United States,” the strategists said.

Other oil exporting countries have also lifted exports, but by smaller amounts. Canada was the second largest contributor with 0.4 million barrels per day, followed by Argentina and Venezuela adding 0.2 million barrels each.

China dampens demand

On the demand side, some oil exporters have lowered net imports, China in particular.

In the same month period 2026 to 2025 comparison, countries that typically import oil have cut their seaborne net imports by 10.9 million barrels per day, which exceeds the net contraction in exports.

This dynamic signals there there has been demand destruction, which could be driven by buyers holding off on purchases expecting the Strait to reopen soon.

China alone makes up half of the decrease in imports. The country imported around 14 million barrels per day a year ago, but today imports about 8.5 million barrels per day.

“The scale of the adjustment is remarkable and, in our view, this is the single most important component of the puzzle,” Morgan Stanley said.

Signs point to China having a hearty oil reserve that the country is drawing on as it dials back imports.

China isn’t the only nation that’s bringing in less oil. Japan, South Korea, India and Singapore have cut a collective 3.9 million barrels per day. Europe and other refiners make up around the 1.5 million barrel remaining cuts.