Six months into the Iran war, the global oil market is being shaped less by OPEC+ policy signals and increasingly by physical supply constraints and changing demand from China.
The conflict has disrupted a major Middle Eastern export route and damaged energy infrastructure in several OPEC countries, reducing the alliance’s share of world production and limiting its ability to influence prices through output decisions alone.
At the same time, a sharp decline in Chinese crude imports has helped offset some of the impact of what analysts describe as an unprecedented supply shock.
OPEC+, which includes the Organization of the Petroleum Exporting Countries and partners such as Russia, accounted for roughly 40% of global oil production in July, according to Reuters calculations based on International Energy Agency data.
That compares with more than 48% before the US and Israel attacked Iran in late February. Around four to five percentage points of the decline reflected the United Arab Emirates’ withdrawal from OPEC in May.
The core seven-member OPEC+ group, including Saudi Arabia and Russia, represented only around 25% of global oil output in July.
Hormuz blockade changes the role of OPEC+
A key challenge for OPEC+ has been the effective closure of the Strait of Hormuz, which has restricted exports from Saudi Arabia, Iraq, Kuwait and other major regional producers.
This has weakened the traditional link between production targets and actual market supply. Even when OPEC+ announces higher output, physical export constraints can prevent those additional barrels from reaching buyers.
OPEC was established in 1960, while the broader OPEC+ alliance took shape in 2016 when Russia and other producers joined coordinated supply efforts.
Historically, OPEC’s share of global crude production peaked at around 50% during the oil crises of the 1970s before declining to approximately 30% by the mid-1980s as production expanded in areas such as the North Sea, Alaska and Siberia.
OPEC did not respond to a Reuters request for comment. OPEC+ has repeatedly said its decisions are aimed at supporting market stability rather than targeting a specific oil price.
The group has dealt with wartime disruptions before, including Kuwait during the Gulf War and Iraq following the 2003 US-led invasion. The difference today is that several producers are constrained at the same time, making it more difficult for the alliance to compensate for outages elsewhere.
Since March, the core OPEC+ members have announced six production increases. Most have had limited market impact because the Hormuz disruption has prevented much of the additional output from being exported.
The notable exception came in July, when a brief US-Iran ceasefire raised expectations that the strait might reopen and temporarily restored greater importance to OPEC+ announcements.
Physical supply now matters more than quotas
The current environment differs sharply from 2019, when traders closely followed OPEC+ decisions to determine how much crude the alliance intended to produce.
Today, the more important issue is how much oil can physically reach the market.
The war has shifted attention away from headline quotas and towards export infrastructure, shipping capacity and the practical availability of crude.
That change has reduced the immediate power of OPEC+ policy decisions and created a market where logistics can be more important than stated production targets.
China’s imports become a major price signal
China has emerged as another crucial force in the market.
Since the war began, Chinese crude purchases have fallen by roughly 400 million barrels compared with the same period last year.
The decline has been linked to restrictions on fuel exports, lower refinery activity and increasing adoption of electric transport.
Weaker Chinese demand has helped prevent oil prices from rising even further despite the major disruption to Middle Eastern supply.
The situation marks a reversal from last year, when strong Chinese buying may have accounted for as much as half of global oil demand growth and provided significant support to crude prices.
“They’ve become the swing demand centre,” said June Goh, an analyst at Sparta Commodities.
The shift highlights a broader transformation in global energy markets, with OPEC+ retaining substantial importance but China increasingly influencing prices through changes in consumption rather than production.
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