The global energy system is entering a new era defined by opposing forces. Increasing geopolitical fragmentation will cause more frequent, severe supply disruptions. Simultaneously, the system is demonstrating a surprising and growing ability to adapt and absorb these shocks, led by major consumers like China.
Despite the positive news of a US-Iran deal, oil prices may not fall much further. The market has largely anticipated the recovery of Middle Eastern supply, meaning any setbacks could cause a significant price spike, while a smooth reopening offers limited additional downside.
The distribution of potential oil price outcomes is heavily skewed. A scenario where the Iran deal fails could add over $50 to Brent prices, pushing them beyond $130. In contrast, a best-case scenario with a quick recovery would only reduce prices by about $20, creating an asymmetric risk profile for markets.
The primary reason oil prices didn't surge into the triple digits was China's remarkable ability to adapt. By massively reducing crude imports and switching to other sources like coal while accelerating EV adoption, China single-handedly absorbed a significant portion of the global supply shock.