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US / Israel–Iran War · Market Update
- Iran’s seaborne crude exports have fallen to zero amid the US blockade, leaving 83 mln bbl stranded at sea, while weaker Chinese demand and a 48% monthly drop in Iranian LPG exports have reduced combined high-risk crude exports from Iran, Russia and Venezuela to 4.73 MBpd, despite Russian exports rising 6% to 3.79 MBpd.
- Freight rates for Russian Urals crude exports to India surged to record highs in early Oct’26, with Black Sea–India Suezmax voyage costs rising to 27–30 mln USD from around 19 mln USD in Sep’26, pushing freight costs to approximately 30 USD/bbl.
- Baltic–western India Aframax freight rates also increased to 21–23 mln USD per voyage, up from 13–16 mln USD in Sep’26, while Black Sea–Mediterranean rates nearly doubled to WS 1,002.5 from around WS 500, raising export costs for Russian crude shipments to Asia.
- Rising tanker freight rates and limited US refining capacity have created a surplus of heavy crude across the United States, Canada, Colombia, Ecuador and Venezuela. Shipping a supertanker from the US Gulf Coast to Asia has become as expensive as 80 mln USD, equivalent to approximately 40 USD /bbl. These transportation and refining constraints are forcing producers to accumulate crude inventories even as buyers in Asia and Europe face supply shortages.
- US President Donald Trump stated that Washington would not launch an attack on Iran before the 3rd Nov’26 midterm elections, citing ongoing productive discussions with Tehran aimed at resolving the conflict.
- US President Donald Trump proposed an energy ceasefire between Russia and Ukraine on 11th Oct’26 , urging both sides to halt attacks on energy infrastructure, including oil refineries. Ukraine expressed willingness to suspend refinery strikes if Russia stopped attacks on Ukrainian energy facilities, although Moscow had not officially confirmed the agreement.
- US announced an agreement for Russia to deliver more than 0.3 mln tons of diesel initially, followed by a further 0.5 mln tons in Nov’26 and an additional 1 mln tons thereafter. To facilitate these shipments, Washington temporarily authorised Russian diesel imports under a US Treasury license valid until 7th Apr’27.
- Germany announced plans to release up to 15 mln bbl of crude oil, diesel and heating oil from its emergency reserves under the G7 backed programme to address supply shortages linked to the Iran and Ukraine conflicts, with diesel and heating oil to be released first, followed by crude oil, to improve fuel availability and ease supply constraints.
- China resumed refined fuel exports on 9th Oct’26 following a temporary suspension during the Golden Week holiday, with authorities approving approximately 3.7 mln tons of combined gasoline, diesel and jet fuel exports for Oct’26, compared with more than 4 mln tons in Sep’26 which is expected to provide some relief to Asian fuel markets.
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:
War Front: Middle East tensions escalated as Houthi attacks on Saudi Arabia continued, while Iran intensified disruptions to commercial shipping around the Strait of Hormuz, with at least five maritime incidents reported within 48 hours. Brent crude rose 0.8% to USD 106.58/barrel amid renewed Gulf supply concerns.
US central bank viewed inflation as the biggest risk to their outlook, with most participants assessed that another increase in the fed funds target range would likely be appropriate by year end. This led to a higher Treasury yields ,strengthening the dollar’s interest rate differentials. However, September nonfarm payrolls increased by only 29K, well below expectations, adding to expectations that the Fed may have less scope for October Fed rate hike, along with dovish comments from New York Fed President John Williams, further limited the dollar’s upside.
Steel:
- Steel supply chains remain largely insulated from the Middle East conflict.
- Moreover, HRC prices are up by 1.4% on a monthly basis due to raw material price surge and stronger demand from auto sector.
Base metals:
- LME 3M copper are up by 1.6% on a weekly basis as support from weaker job data, reduced rate hike expectations, several supply disruptions in Chile (Escondida, Radomiro Tomic, and Centinela), backwardation structure was capped by progress in Grasberg repairs and geopolitical tensions.
- Aluminum prices are down 3.1% due to gradual recovery from GCC and stronger dollar despite tensions in the middle east.
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 October, Saudi Aramco CP was set at USD 680/ton for propane and USD 730/ton for butane, representing increases of USD 55/ton and USD 70/ton, respectively, from September levels. The propane-butane spread widened further to USD 50/ton, compared with USD 35/ton in September and USD 20/ton in August, indicating continued relative strength in butane pricing and tighter butane availability compared with propane. The larger month-on-month increase in butane also points to a stronger rise in butane market tightness entering October.
- Sonatrach increased its October propane OSP by USD 110/ton, from USD 560/ton in September to USD 670/ton. Meanwhile, the butane OSP increased by USD 140/ton, from USD 610/ton to USD 750/ton.
- US LPG prices strengthened across the board between 1 October and 8 October 2026, with propane rising by 8.6% to USD 466/ton from USD 429/ton. Butane increased by 7.6% to USD 738/ton from USD 686/ton, while the 50:50 LPG blend climbed by 8.0% to USD 601.77/ton from USD 557.28/ton. Notably, the Mont Belvieu 50:50 LPG blend crossed the USD 600/ton threshold for the first time since 2022, underscoring the strength of the current price rally. The simultaneous increase in propane and butane indicates broad-based upward pressure across the US LPG market rather than a rally driven by a single component.