Driving the news: Oil prices have climbed back above $100 per barrel as mutual tanker attacks in the Strait of Hormuz intensify. Wall Street's big banks and the US Energy Information Administration all raised their 2027 price forecasts this week, citing a 'new normal' of prolonged disruption.
The big picture: S&P Global Energy concluded for the first time since the war started that it 'does not project Middle Eastern crude oil production to return to prewar levels by the end of 2027.' Supply is constrained — Trump administration assurances notwithstanding.
But here's the twist: Demand is cracking too — and faster than analysts expected.
- Since the war started, oil demand has run about 5 million barrels per day below last year, according to JP Morgan's Natasha Kaneva. - Kaneva warns that if the Strait of Hormuz remains in semi-closure, demand next year will fall to its lowest point since 2019. - Alternative energy sources have left businesses and consumers with a lower tolerance for expensive fuel than the market assumed.
Between the lines: Oil demand has long been treated as nearly inelastic — people drive to work regardless of price. That assumption is eroding. The proliferation of alternatives has quietly lowered the price threshold at which consumers and businesses actually cut back.
The bottom line: The Iran war may be doing what no climate policy ever managed: dragging forward peak oil consumption. For energy markets and petrostates alike, that is a structural shift, not a cycle. Investors banking on a simple supply-shock recovery may be reading the wrong playbook.