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US / Israel–Iran War · Market Update
- Iran and Oman reported progress on a temporary shipping route through the Strait of Hormuz, although this would not mean a full reopening of the Strait.
- Vessel traffic remains low as key details are still under discussion. Meanwhile, Houthi forces claimed an attack on a Saudi tanker near Yanbu and threatened further attacks in the Red Sea and Gulf of Aden, keeping shipping risks high.
- OPEC+ is set to increase production by around 188,000 b/d, while geopolitical tensions around Hormuz and the Red Sea continue to drive crude supply and trade flows.
- The US crude inventories rose by 2.5 mln bbl to 407 mln bbl for the week ending 31st July, against expectations of a decline, adding some downward pressure on crude prices. Meanwhile, SPR stocks fell by 2.8 mln bbl to 304.8 mln bbl, keeping emergency reserves at low levels. Refinery activity remained strong at 96.5%, although crude processing declined slightly to 17.2 MBpd.
- The US crude imports increased to 6.2 MBpd, while exports reached 3.7 MBpd. At the same time, gasoline and distillate stocks declined, indicating relatively tighter fuel inventories.
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:
US President Donald Trump says ongoing negotiations are Iran's "last chance" for a deal to end the conflict, after he called off a planned major military strike. Meanwhile, Tehran publicly denies direct talks with Washington, stating it is only discussing a temporary safe shipping route through the Strait of Hormuz with Oman.
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 7.1%.
Base metals:
- Copper prices are up 3.9% on a weekly basis, as Fed holds interest rates pressuring dollar, market remains in backwardation structure, and inflation pressures ease with softer CPI and weaker job data despite persistent geopolitical conflicts. Prices receive continued support from CME-LME arbitrage, high China copper premium, exchange inventory outflows, and persistent mine supply constraints which offset pressure from renewed tensions, hawkish Fed outlook, and elevated global inventories.
- Aluminum prices are up 0.7% on a weekly basis due to renewed tensions.
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
- For August 2026, Saudi Aramco Contract Prices (CPs) rebounded to USD 620/ton for propane and USD 640/ton for butane, compared with USD 580/ton and USD 600/ton, respectively, in July. This represents a 6.9% month-on-month increase in propane CPs and a 6.7% month-on-month increase in butane CPs.
- Sonatrach raised its August propane OSP by 4.2% m-o-m, from $518/ton to $540/ton, while the butane OSP was cut by 5.0%, from $600/ton to $570/ton.
- India’s commercial LPG prices eased further in August, with the 19 kg cylinder price in New Delhi declining by ₹192, from ₹2,930 in July to ₹2,738 as of 3 August 2026. Despite the recent correction, commercial LPG remains substantially above its pre-war level of ₹1,741/cylinder. In contrast, the 14.2 kg domestic LPG cylinder remained unchanged at ₹942, reflecting continued price stability for household consumers.