The US-Iran war is back in full force, traffic through the Strait of Hormuz is plummeting, and attacks from the Houthis have threatened shipping through the Red Sea, a critical release valve for oil in the Persian Gulf.

In other words, a lot is going wrong for oil markets.

Since the conflict began in late February, the world has lost roughly 11.1 million barrels per day of oil supply, or roughly 10% of global demand. That loss has drawn down global inventories to record lows, according to a team of JPMorgan strategists led by Natasha Kaneva.

More from Yahoo Scout How much oil supply has been lost since conflict began? What role is China playing in oil markets? Why are oil prices below previous wartime peaks? How has global oil demand changed this year?

Yet, even as the Houthis have begun targeting vessels in the Red Sea, threatening to choke off roughly 5 million barrels per day of oil from Saudi Arabia, futures have remained far below their wartime peaks. Brent (BZ=F), the international benchmark, crossed above $101 per barrel on Thursday, while US WTI crude (CL=F) climbed past $92, but both remain roughly $20 below their April and May highs.

So why are prices still below their previous wartime highs?

The market has rebalanced, the strategists said, and the key lever has been demand.

Demand has fallen faster and more steeply than in any of the past six years, aside from the pandemic-driven downturn in 2020. If inventories — or supply — had fallen to their current lows with no demand adjustment, the JPMorgan strategists reasoned, prices would have likely raced upward far faster.

Instead, the market killed demand, thereby keeping prices contained.

Global oil demand is now expected to decline by 1 million barrels per day this year, according to the International Energy Agency's latest monthly oil market report, even as a "recovery in world oil demand is underway." The forecast represents a significant change over the IEA's May report, which estimated demand would drop by only 420,000 barrels per day.

"Our initial expectation was that the burden of adjustment would fall overwhelmingly on inventories, with demand continuing to grow," the strategists wrote. "Instead, the opposite happened."

Read more: How oil price shocks ripple through your wallet, from gas to groceries

Global oil demand has fallen further and faster than previously expected, per JPMorgan. (Chart: JPMorgan) · JPMorgan

The question for oil market watchers is where that demand destruction came from and how sustainable it is.

The demand loss is "so extraordinary that it naturally invites skepticism, particularly given that the global economy grew above potential during the first half of the year," the JPMorgan strategists wrote.

There's a chance that some countries without clear international reporting standards are releasing barrels from unknown reserves. China is the biggest suspect here, as the country — usually the world's largest importer of crude — rapidly cut down imports, giving the global energy complex some breathing room.