On paper, everything appears to be under a strange kind of control. But physical oil runs on its own clock. Once that clock starts ticking, the market could wake up explosively
The oil market these days resembles an instrument measuring the wrong pressure. The Strait of Hormuz is under severe strain, negotiations between Iran and the United States have once again deteriorated into threats and military strikes, and ships are trickling through the strait. Yet the price of oil remains curiously low for a crisis that, in any previous era, would already have triggered full-scale energy panic.
So what is really happening? How did we end up in this parallel, seemingly impossible reality? Are markets still driven by market logic at all? Or is something steering the price of oil beyond all rational expectations? The story is bigger than the usual explanations, because the claim that “markets know the two sides will eventually reach an agreement” simply doesn’t hold water in Hormuz.
We don’t need to explain what Hormuz is. We grew up hearing warnings about what would happen if this narrow energy chokepoint were ever closed. Yet the temperature of the conflict continues to rise, while oil behaves as though the crisis already has a predetermined expiration date.
The current price, however, is deceptive. It does not signal calm. Rather, it reflects—at least in part—the shock absorbers the system still possesses. Some oil continues to leave the Gulf, albeit under greater risk. China has stepped back from aggressive buying, removing what would otherwise be the strongest source of demand pressure. Strategic and commercial inventories are absorbing part of the shock. Meanwhile, financial markets trade enormous volumes of paper barrels, often with little connection to physical delivery. Together, these factors can maintain the illusion of normality for a while.
It is worth examining what those who study oil pricing professionally have to say about this anomaly.
Three analysts interviewed by Mario Nawfal offer three distinct explanations. Chris Martenson sees a dangerous game involving strategic reserves, paper markets, and the possible deliberate suppression of prices. Jeffrey Snider interprets the market through the logic of uncertainty, arguing that traders are selling because they expect weaker demand and an eventual exit from the conflict. Jeffrey Currie focuses on the physical mechanics of the oil market—ships, inventories, refineries, and China’s disappearance from global imports. Viewed together, their perspectives provide a far more convincing picture than official optimism.
Chris Martenson and the Invisible Hand of Paper Barrels
Chris Martenson begins with the most tangible fact of all. Oil must be extracted, stored, transported, and burned. Financial markets can distort the price signal for a time, but they cannot produce diesel in a fuel tank. That distinction between financial pricing and physical supply lies at the heart of his concern.
The ticking clock, in his view, is America’s Strategic Petroleum Reserve. Washington can release oil from its reserves to keep fuel prices under control, but that capacity is finite. If, for example, the U.S. military wishes to preserve a minimum emergency reserve for a larger crisis, then the amount actually available for political intervention may be significantly smaller than headline figures suggest. In that case, today’s lower prices come at the expense of tomorrow’s security.
Martenson argues that this actually benefits Iran. Tehran does not need to close Hormuz completely to exert pressure. It only needs to maintain enough uncertainty to disrupt some shipping, raise insurance costs, and force Washington to draw down its reserves. The United States wants low gasoline prices, military control of the waterway, and the political image of strength. Pursuing all three simultaneously is costly.
China represents the second key piece of the puzzle. Martenson distinguishes between Chinese consumption and Chinese imports. China can consume roughly the same amount of energy while importing less if it is drawing from stockpiles. Within China’s system, the line between state and commercial inventories is far less distinct than it is in the West, because Beijing exercises much more direct influence over strategic industrial decisions. Consequently, declining imports do not necessarily imply an equivalent decline in demand.
The third element is the paper market. Martenson points to exceptionally large short positions betting against higher oil prices. Given the pressure on Hormuz, attacks on Russian energy infrastructure, and ongoing inventory drawdowns, such heavy positioning against rising prices appears unnatural. He therefore raises the possibility of an invisible hand—market intervention, or at least coordinated pressure suppressing the price signal.
What Are Short Positions?
A short position is essentially a wager that prices will fall. A trader “shorting” oil sells a contract tied to the future price of a barrel, expecting to buy it back later at a lower price and pocket the difference. In the physical world, this would resemble selling something you do not actually possess. Yet in oil markets, much of the trading occurs through futures contracts, exchange-traded funds, and other financial instruments. As a result, millions of paper barrels can be sold without anyone ever intending to take physical delivery.
In the context of Hormuz, this is especially important. Exceptionally large short positions can temporarily suppress prices and create the impression that markets simply do not believe a major energy shock is coming. But every short bet has another side. If physical reality suddenly overwhelms the financial structure—if ships stop sailing, inventories begin falling rapidly, or China returns as an aggressive buyer—those betting on lower prices must close their positions by buying back contracts. Their panic buying could itself accelerate the rally, transforming a calm price chart into a vertical spike.
Martenson compares the situation to historical Western attempts to manage the price of gold. But there is a crucial difference. Gold can sit indefinitely inside a vault. Oil disappears once it is consumed. Every barrel burned must eventually be replaced. If oil prices are indeed being artificially restrained, the consequences are potentially much more serious. A distorted price signal can encourage excessive consumption, complacency, and dangerous political decisions.
His central message is straightforward: today’s low price could be a trap. If Washington is drawing down reserves to maintain politically acceptable fuel prices, Iran can simply wait. If China continues consuming inventories without returning to the market, the West may mistakenly conclude the crisis is under control. The moment inventories reach politically or strategically sensitive levels—or China resumes large-scale purchases—the market could suddenly price in weeks of previously suppressed risk.
Jeffrey Snider and a Market That Sells Into Uncertainty
Jeffrey Snider offers a cooler interpretation. In his framework, there is no hidden hand directing events from behind the scenes. Instead, his analysis begins with how highly leveraged markets behave under uncertainty and weakening demand.
Oil falls because traders believe an exit from the crisis remains likely and expect prices to retreat significantly once political tensions ease.
This explains the paradox confusing many observers. Traditional geopolitical intuition suggests uncertainty should drive prices higher. Today’s financial structure can produce the opposite outcome. Traders look beyond current tensions toward the potential end of the crisis. If they believe the peak of the conflict has passed, any incident that does not physically interrupt oil flows becomes little more than temporary market noise.
Snider therefore emphasizes market dynamics. Once prices begin falling, investors holding long positions unwind them, new sellers join the trend, and downward momentum feeds on itself. In heavily leveraged markets, these moves unfold with remarkable speed. Political observers see warships, drones, and U.S. military strikes. Traders see positioning and probabilities.
China remains central to Snider’s analysis as well. He allows for the possibility of some level of understanding between Washington and Beijing, but he also presents a simpler explanation. If Beijing believes oil could eventually fall to, say, $50 per barrel, why replenish inventories at $70? A major power with ample reserves can afford to wait.
Snider also introduces a broader monetary dimension. The global economy does not function solely through decisions made by the Federal Reserve. It operates through the international dollar system of banks, credit, and liquidity. When dollar liquidity tightens, demand for dollars increases, investors reduce risky positions, and commodity markets come under pressure. In such an environment, fears of weakening demand can outweigh wartime risks.
His interpretation helps explain why oil prices appear calmer than politics. Markets reward neither headlines nor tension alone. They respond to changes in physical supply and expectations about future demand. In Snider’s framework, a sustained return above $100 per barrel would require renewed large-scale warfare, a serious closure of Hormuz, or a dramatic disruption to global supply. Anything short of that, the market continues trying to sell.
Jeffrey Currie and China’s Disappearance from the Heart of the Oil Equation
Jeffrey Currie offers perhaps the most physical explanation—and for that reason, arguably the most compelling.
Commodities must clear today’s surplus or today’s shortage. Stocks and bonds can live on expectations. A barrel of crude oil must find a buyer, a storage tank, a refinery, or a tanker today.
Currie argues that the sudden release of oil previously trapped in the Gulf created a short-term supply surge at the front end of the market. Oil delayed for days or weeks suddenly sought buyers. Such a wave can depress spot prices and reshape the futures curve even while the broader geopolitical environment remains highly dangerous. A temporary physical surplus arriving at the wrong moment can drive prices lower more quickly than diplomatic analysis would suggest.
At the same time, refinery margins remain unusually high. This means crude prices can weaken while refined products remain expensive. That is not a sign of healthy normalization. It reflects an imbalance. Crude has arrived in abundance, but finished fuels remain tight. Refineries are earning exceptional profits, while consumers see far less relief than crude price charts would imply.
Currie also emphasizes that Hormuz has not truly returned to normal. Shipping volumes remain below pre-war levels, transit routes are narrower and riskier, and tanker insurance premiums reveal more fear than oil prices themselves. If transporting oil from the Gulf to Asia becomes dramatically more expensive, it reflects the risks perceived by shipowners, crews, and insurers—even while benchmark crude prices decline.
The greatest mystery in Currie’s analysis remains China. Part of the decline in Chinese imports can be explained by inventory drawdowns, weaker industrial demand, reduced petrochemical consumption, and difficulties facing independent refiners. Yet even after accounting for these factors, several million barrels per day remain unexplained. That gap is large enough to reshape the global oil balance.
If China has indeed been drawing down inventories, today’s lower prices should encourage renewed buying. If Beijing still refrains from aggressive purchases, several possibilities remain. China may possess larger hidden inventories than generally assumed. It may be receiving more Iranian oil through less visible channels. Its economic slowdown may be deeper than official statistics indicate. Or perhaps Beijing is simply waiting for even lower prices.
When the Shock Absorbers Fail and Physical Oil Takes Control
The most convincing explanation emerges when all three perspectives are combined.
Currie provides the physical foundation. Snider explains the market mechanism. Martenson adds the strategic warning.
Prices have fallen because previously trapped oil has entered the market, because China is buying far less than expected, because financial traders are selling in anticipation of an eventual end to the crisis, and because inventories continue to absorb much of the immediate shock.
Several major powers are simultaneously pursuing their own objectives. Washington needs low fuel prices because American politics remains highly sensitive to consumer sentiment. Iran wants to demonstrate that Hormuz cannot function without its consent. China is preserving inventories, negotiating leverage, and the option to return to the market whenever conditions are most favorable. Financial markets are simply searching for trends, liquidity, and a compelling narrative.
Yet inventories provide only temporary peace.
America’s strategic reserves, China’s storage facilities, commercial inventories, tankers, and refineries together form a cushion between war and price. That cushion softens the initial blow but cannot eliminate it. If China resumes buying, if U.S. strategic reserves become politically sensitive, or if shipping companies begin avoiding Hormuz even in exchange for higher freight rates, the price chart could change with remarkable speed.
That is why today’s low oil price is most dangerous if interpreted as proof that everything is safe. It looks less like equilibrium than an invoice that has not yet arrived. The market is currently feeding on inventories, Chinese silence, and paper positions. Every one of those supports has an expiration date. As one weakens, the others must bear more weight. If several fail simultaneously, physical oil will once again become the ultimate judge.
And its verdicts can be both brutal and systemic.
About the Author
Mario Hoffmann is an independent analyst and writer covering global economics, geopolitics, and international affairs. With a background in history and politics, he writes for EconoPuls to provide in-depth context on the stories shaping our world.
