Countries profiting from Iran war oil shock – China, Brazil

China’s rapid cut of roughly 3 million barrels per day of crude imports – from 11.7 m bpd in February to just under 9 m bpd by late May – absorbed about 74 % of the global supply decline triggered by the Iran‑Israel war [1]. The move helped keep Brent crude under $100 despite a 14 % fall in worldwide crude availability since the conflict began on Feb. 28.

China’s “pressure‑valve” role

J.P. Morgan analysts note that China’s import reduction was the largest single offset to the Hormuz supply shock, second only to Saudi Arabia’s rerouting of oil flows and larger than the coordinated strategic‑reserve releases by the U.S., Europe and Japan [1]. By scaling back demand, Beijing has effectively taken up slack that would otherwise have driven crude prices higher. Societe Generale estimates the 14 % supply loss has already lifted oil prices about 30 % – a far smaller jump than the 134 % surge seen after the 1973 OPEC embargo, which cut supply by only 7 % [1].

Other beneficiaries

Analysts point to Brazil and Venezuela as the only major producers that have increased output since the conflict began, helping to further blunt the price impact [1]. Saudi Arabia’s ability to reroute flows around the Strait of Hormuz also provided a critical buffer, according to SocGen’s commodity team [1]. These supply‑side adjustments, together with strategic inventory releases, have prevented a repeat of the 1973 price explosion.

Inflation ripple effects

The oil shock is already feeding through to broader price pressures. U.S. wholesale inflation, measured by the Producer Price Index, rose 1.1 % in May, taking the annual rate to 6.5 % – the highest level since November 2022 [2]. Economists had expected a 0.6 % monthly increase, indicating that higher input costs for businesses are persisting despite the modest oil price rise [2]. The PPI’s upward momentum signals potential downstream pressure on consumer prices and could influence the Federal Reserve’s rate outlook.

What to watch

• Strait of Hormuz status – A reopening in June (base case) would likely keep Brent near $100, while a later reopening could add $5‑$15 to prices in Q3‑Q4, per J.P. Morgan [1].
• U.S. PPI releases – The next monthly PPI report (due early July) will show whether wholesale inflation is still accelerating.
• Output from Brazil and Venezuela – Increases in their export volumes could further offset the Hormuz supply squeeze.

China’s demand curtailment, combined with output gains from Brazil, Venezuela and Saudi Arabia, has turned the Iran‑Israel conflict into a supply‑adjustment episode rather than a price‑spike crisis. The key uncertainty remains how long the Strait of Hormuz stays closed and whether strategic reserves can be replenished without reigniting higher oil prices.