⚡
US / Israel–Iran War · Market Update
- Oil prices rebounded on 27 Aug'26 as hopes of a renewed US-Iran ceasefire and a diplomatic breakthrough faded after President Trump rejected a return to the previous deal terms, raising concerns that Middle Eastern supply disruptions and restricted flows through the Strait of Hormuz could persist.
- Iran and Oman are working toward a designated shipping corridor through the Strait of Hormuz, as Qatar pushes Tehran to restore freedom of navigation, while Iran prepares conditions for reopening the waterway, including sanctions relief and an end to the US blockade of its ports.
- Shipping traffic through the Strait of Hormuz rose slightly to 10 vessels on 26 Aug'26 from 8 on 25Aug'26, but remained below normal levels amid ongoing US-Iran tensions and talks, while Bab el-Mandeb traffic fell to 19 vessels on 26 Aug'26 from 24 on 25 Aug'26 highlighting cautious movement through these key routes.
- Kuwait Integrated Petroleum Industries had restarted all three crude units at its 615,000 Bpd Al-Zour refinery at around 60% capacity on 19 Aug'26 which had been damaged in an Iranian drone attack in May'26 disrupting its operations.
- Venezuela is considering leaving OPEC as it strengthens ties with the US, after years of failing to meet OPEC production quotas due to underinvestment, neglect and corruption in its state-run oil industry, potentially weakening OPEC’s influence over global oil markets.
- According to market grapevine, Asia’s crude imports are projected at 23.12 MBpd in Aug'26, down by 14% (~3.8 MBpd) from the pre war average of 26.91 MBpd, while only 2.3 MBpd of crude exports has been tracked through the Strait of Hormuz, compared with 15.82 MBpd before the conflict, highlighting continued disruption to Middle Eastern oil flows.
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:
Iran Tightens Control Over Hormuz as US Sanctions Escalate: US-Iran tensions remained elevated with no clear breakthrough in diplomatic efforts. Iran’s parliament security committee advanced a draft law that would allow Tehran to charge vessels fees for services provided while transiting the Strait of Hormuz, reinforcing Iran’s intention to maintain control over the waterway and regulate commercial traffic. Meanwhile, the U.S. is preparing a new round of sweeping sanctions against Iran and entities trading with Tehran, while Iranian officials have warned that support for the sanctions could be treated as an “act of war.” This increases the risk of further escalation and prolongs uncertainty around Gulf trade and shipping.
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 7.8%.
Base metals:
- Copper prices are up 0.6% on a weekly basis. Prices remain elevated as negative retails sales, weaker job data and softer CPI shifts Fed hike expectations lower, market remains in backwardation structure, and inflation pressures ease amid ceasefire. Prices receive continued support from CME-LME arbitrage, supply constraints, exchange inventory outflows, and persistent mine supply constraints.
- Aluminum prices are down 1% on a weekly basis as due to subdued demand and improving supply conditions.
Precious metals:
- Stronger U.S. yields and weak industrial offtake are suppressing any upside momentum.
- Stronger US Dollar and geopolitical tensions are 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.