Trump Says He Expected Oil to Spike to $200. Here’s Why It Hasn’t.

Oil prices haven’t seen the dramatic surge that some warned about from the war in Iran.

Crude futures are above prewar levels, but still well below the more dire spikes that some forecasters had predicted at the outset of the war. Goldman Sachs credited the resilience to three factors: a lower risk premium, destocking, and a moderation in spot buying.

WTI oil was below $95 per barrel on Friday. Crude is down sharply from its wartime high, and even President Trump said this week that he expected oil to hit $200 a barrel due to the conflict.

Prices have found some stability despite little improvement in flows through the Strait of Hormuz, the critical waterway that handles about 20% of the world’s oil.

It’s important to note that physical prices are higher than prices for oil futures, but investors aren’t trading physical barrels, and the disconnect between physical and paper pricing reflects investors’ expectations for the war to soon be over.

Still, the oil has proven surprisingly resilient in the face of historic disruption. Here’s what market pros had to say about why.

Investors expect a resolution soon

Investors are counting on Trump to resolve the Iran war soon, and market pricing reflects that sentiment.

The turning point for financial markets was April 7, when Trump announced a temporary US-Iran ceasefire, sending oil prices plunging. The initial ceasefire signaled to investors that Trump was seeking an offramp and was sensitive to market reactions.

Pressures for Trump to reach some resolution in the Middle East are mounting not only from higher oil prices.

Tom Graff, CIO at Facet, flagged that gas prices function as a key limit on how long the Strait of Hormuz can remain effectively closed, especially in a midterm election year.

The strategist told Business Insider he believes oil prices have likely already peaked, but that gas prices, which are what the average consumer cares about, have further to rise, and will push Trump to resolve the war.

It’s not only investors who are expecting a resolution soon. Neal Dingmann, an energy analyst at William Blair, said it’s “very telling” that exploration and production companies aren’t changing plans to add rigs, a signal that they don’t expect the oil disruption to span longer than a few months.

Prewar oil supplies cushion prices

Draws for oil stockpiles have helped avoid the worst-case predictions of supply shortages.

Nations and companies are drawing from their reserves on the expectation that flows through the Strait of Hormuz will normalize in the near future.

Vikas Dwivedi, a global oil strategist at Macquarie Group, said that the global market was in a surplus ahead of the conflict, muting the futures pricing moves. The strategist compared the dynamic to “going in nice and fat into the winter.”

Another contributing factor is that the global economy is less dependent on oil than it has been historically, making the crisis less impactful than past shocks.

Moderation in buying, cooling demand

Oil spot buying, which is buying physical oil for immediate delivery, has moderated, Goldman said.

Buyers aren’t scrambling to buy oil now on the expectation that normalization is coming, keeping a lid on demand.

Dwivedi said refiners buying crude are comfortable waiting a few months since they have some supply stored, which has helped cap increases in futures prices.

He explained that the conflict happens to overlap with the maintenance season for global refiners, which makes it even easier to justify holding off on buying.

Another factor that could be contributing to less buying is demand destruction, at least on the margin. The first signs of demand destruction have cropped up in Asian markets that are more dependent on oil flows from the Middle East.

Despite this trio of tempering forces, a future spike in oil to those mid- to high-triple-digit levels experts warned about could still transpire. The Iran war has been largely unpredictable to date, so although the factors outlined above are constructive, investors should still be watching out for a tail-risk scenario.