- Asian refiners are rerouting Saudi crude shipments from Yanbu via the Suez Canal and around Africa, adding up to four weeks of transit time and higher shipping costs, as Houthi blockade threats disrupt a route that recently carried a record over 4 MBpd of Saudi oil.
- Three Saudi oil tankers carrying about 4.7 mln bbl of crude for China and India reversed course in the Red Sea after the Houthis threatened ships calling at Saudi ports, raising the risk of prolonged shipping delays, higher insurance costs, and disruptions to a route that typically handles around 10 crude tankers per day.
- Saudi Arabia's crude oil exports fell for a third consecutive month to a record low of 3.43 MBpd in May'26, as Middle East conflict disrupted shipments, while rising domestic refining and crude burn further constrained exports despite a modest recovery in production.
- A potential Houthi blockade of the Bab el-Mandeb Strait could severely disrupt Saudi Arabia oil exports and global shipping, driving up crude prices, increasing freight costs, delaying fuel supplies, and raising the risk of broader economic slowdown.
- Chevron has shut in production at its Petronius platform and evacuated personnel ahead of Tropical Depression Two, which is expected to strengthen and disrupt Gulf of America oil production, potentially reducing output by up to 2 million barrels while prompting broader energy sector storm preparations.
- China's crude oil imports plunged 41.3% YoY to 7.12 MBpd in Jun'26, the lowest since Oct'16, while refinery throughput fell 17.7% to 12.47 MBpd, reflecting weaker demand and reliance on stockpiles during the Iran conflict.
- Although China drew about 0.94 MBpd from inventories in Jun'26 and still added around 0.53 MBpd to reserves in the first half of the year, it may increase refinery runs and fuel exports as Asian refining margins have widened.
War Impact on Crude Oil & Gasoil/Diesel Prices
War Impact on Gasoline, ATF & Natural Gas Prices
GCC Bypass Pipelines Running Near Capacity — But Shah Gas Field Ablaze and Fujairah Zone Struck
- Saudi Arabia's East-West pipeline is pumping oil at its full capacity of 7 MBpd, bypassing the Strait of Hormuz. Crude oil exports from Yanbu port have reached 5 MBpd, and the country is also exporting 0.70 to 0.90 MBpd of oil products.
- Of approximately 15 MBpd of crude transiting the Strait of Hormuz in OND'25, combined SPR releases and bypass pipeline capacity can offset roughly two-thirds — or slightly more — for the next 20 to 30 days, providing the Trump administration a window to assess strategic direction.
- New strikes directly threaten this buffer — Iranian drones struck the UAE's Shah gas field (currently ablaze) and the Fujairah Oil Industry Zone on Mar 17. A tanker was also hit near the Strait of Hormuz. Saudi Arabia intercepted over a dozen drones; Kuwait and Bahrain sustained additional attacks. These represent the first direct strikes on GCC energy export infrastructure since the conflict began.
War Scenarios Point to Global Supply Deficit of 0.92–1.07 MBpd in 2026 and AMJ Quarter Most Severe with a deficit of 4.10 MBpd.
Pre-war, global supply and demand were near-balanced with a modest surplus of +0.55 MBpd projected for 2026. Both conflict scenarios introduce significant supply deficits driven by Strait of Hormuz disruptions and impacts on Iraq and Kuwait crude production.
- Scenario 1 (Preferred): Ceasefire talks continue to progress positively, with tanker flows through the Strait of Hormuz gradually normalizing over the next 4–5 weeks. Supply recovers steadily, while demand improves at a slower pace and remains below pre-war expectations, resulting in a moderate market surplus.
- Scenario 2 (Alternate): The Strait of Hormuz normalizes over the next 4–5 weeks, supporting a gradual recovery in oil exports and supply. Demand rebounds more strongly than in Scenario 1, reducing the market surplus, although overall consumption remains below pre-war levels.
Geopolitical backdrop:
The Middle East conflict intensified further after Yemen's Iran-backed Houthi movement announced a maritime blockade against Saudi Arabia, opening a new front in the ongoing U.S.-Iran conflict. The Saudi-led coalition condemned the move and pledged a military response while strengthening security measures around the Bab el-Mandeb Strait, a critical shipping corridor for Saudi crude exports following the disruption of traffic through the Strait of Hormuz.
The conflict has expanded beyond Iran and Israel, with fresh attacks involving Bahrain, Kuwait, Jordan, and continued hostilities in Yemen. Iran has stated that it is fully prepared for a prolonged conflict, reinforcing expectations that the crisis is unlikely to de-escalate in the near term. Meanwhile, media reports suggesting that Iran could broaden its ground military operations toward Kuwait have further heightened regional security concerns, although the reports remain unconfirmed. At the same time, growing risks to maritime trade through the Strait of Hormuz and the Bab el-Mandeb have intensified concerns over potential disruptions to global energy supplies. Brent crude has climbed back to around USD 90 per barrel, increasing upside risks to global inflation and strengthening expectations that major central banks may be forced to maintain restrictive monetary policy for longer if elevated energy prices persist.
Steel:
- Domestic steel prices have moderated from recent highs.
- Steel supply chains remain largely insulated from the Middle East conflict.
- Since, the start of war steel HRC prices are up by 7.4%.
Base metals:
- Copper prices are up 1.3% on a weekly basis, as China copper premium rises to 13 month high and inflation pressures ease with softer CPI and weaker job data despite persistent geopolitical conflicts. Prices receive continued support from CME-LME arbitrage, exchange inventory outflows, and persistent mine supply constraints which offset pressure from renewed tensions, hawkish Fed outlook, contango market, and elevated global inventories.
- Renewed tensions and weaker US CPI release is supporting aluminum prices. Prices are up 0.6% on a weekly basis.
Precious metals:
- Stronger U.S. yields and weak industrial offtake, especially auto are suppressing any upside momentum.
- Stronger US Dollar due to anticipation of rate hike in US is weighing on precious metal prices.
LPG Market Update
- As of 1 July 2026, India has reduced the price of the 19 kg commercial LPG cylinder by INR 183.5 per cylinder, lowering it from INR 3,113 to INR 2,930. The reduction reflects the recent easing in international LPG prices and freight rates following the de-escalation of geopolitical tensions in the Middle East, which has improved global supply conditions and reduced import costs.
- In response to the improving supply outlook, the Government has also begun rolling back several emergency measures implemented during the recent LPG supply disruption. Supplies of non-domestic packed LPG have been fully restored, while bulk LPG allocations to commercial and industrial consumers have been increased to 50% of pre-crisis consumption levels. These measures are expected to provide significant relief to LPG-dependent sectors, including manufacturing industries, hotels, restaurants, catering services, and other commercial establishments, while supporting a gradual normalization of the domestic LPG market.