Hormuz Reopening Drags Oil Below $80 Amid Chinese Demand Slump

The Strait of Hormuz has reopened following a U.S.-Iran agreement, leading to a significant drop in global crude oil prices, now trading below $80 per barrel. This development effectively removes the geopolitical "war premium" that had been factored into the market due to recent maritime tensions. Simultaneously, China's crude refining throughput has experienced a notable year-over-year decline. According to data from the National Bureau of Statistics, Chinese refinery runs plunged by 9.1% to 12.7 million barrels per day (b/d). This marks one of the most substantial instances of demand destruction observed in the aftermath of the U.S.-Iran conflict. The current refinery activity levels are the lowest recorded since April 2022, primarily driven by negative refining margins. The combined effect of eased shipping concerns in a critical chokepoint and reduced demand from the world's largest oil importer has created significant downward pressure on crude prices. While the immediate geopolitical risk in Hormuz has abated, the market remains exposed to potential escalations in other regional hotspots, particularly Lebanon, which could reintroduce supply concerns. The substantial reduction in Chinese refining operations underscores underlying economic challenges impacting the country's industrial activity and overall energy consumption.