Refiners in India and China, the world's largest oil importers, are aggressively increasing their spot purchases of Middle Eastern crude oil, leading to a significant rise in prices. These nations are competing with buyers in South Korea and Japan for supplies, which are currently threatened by escalating hostilities between the US and Iran. This surge in demand and geopolitical tension has pushed benchmark Dubai futures to nearly $100 a barrel, marking their highest level since May.
The heightened competition is also evident in the physical premiums for Oman and Murban crude, which have surged. Concerns over potential supply disruptions stemming from Iran and its proxies, including Yemen's Houthis, are contributing to this upward price pressure in the market.
Simultaneously, broader oil prices are experiencing volatility due to renewed military strikes between the US and Iran. Brent crude futures, for instance, fluctuated between gains of as much as $2 a barrel and losses of $1 a barrel during previous trading sessions, reaching their highest levels since July 24. On Thursday, Brent crude futures fell 43 cents, or 0.45%, to $95.2 a barrel, while U.S. West Texas Intermediate (WTI) crude futures were down 24 cents, or 0.26%, at $90.77. The overall oil price has risen approximately 60% this year, with refined products like diesel experiencing even sharper rallies due to the Middle East conflict and the Russia-Ukraine war.
US President Donald Trump indicated that the renewed US campaign against Iran would not last "too long," stating that US forces had targeted Iran's radar and missile systems. He claimed, "We took out all of the new equipment that they tried to build along the Strait of Hormuz." Despite these assurances, the uncertainty surrounding potential supply disruptions from the Middle East continues to influence investor sentiment.
The Strait of Hormuz remains a critical chokepoint for oil shipments. On Monday, 17 million barrels of oil transited the Strait, and on Tuesday, the US military escorted 40 vessels carrying 18 million barrels through the waterway. This demonstrates the continued, albeit protected, flow of oil despite the ongoing conflict. However, Iran has also added more ships to a list of vessels deemed non-compliant, subject to fines or confiscation if they attempt to sail through the Strait, further adding to market apprehension.
