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US / Israel–Iran War · Market Update
- The US carried out its latest strikes on IRGC targets in Iran, including air defences, radar and maritime assets, prompting Iranian retaliation against US positions across the region and intensifying concerns over energy supply disruptions, despite 17 mln bbl of oil reportedly transiting the Strait of Hormuz on 31st Aug’26.
- Strait of Hormuz traffic weakened with only 6 commodity vessels transiting on 2nd Aug’26 versus 11 the previous day, while Iran tightened restrictions on non-compliant vessels, raising concerns over further disruptions to regional oil flows.
- Demand from major Asian buyers, particularly China and India, also strengthened, with Chinese refiners purchasing at least 16 mln bbl of Basrah crude for Sep’26 delivery, while Reliance Industries received around 4 mln bbl in Aug’26 which is improving the availability of heavy, high sulphur Iraqi crude in Asian markets.
- The US is planning to replenish its Strategic Petroleum Reserve (SPR) using oil secured under its recent Venezuela deal, following a release of up to 172 mln bbl during the Iran war that has pushed the SPR to a 44 year low but due to the high sulfur and heavy nature of Venezuelan crude it may be swapped with light or medium density US crude oil.
- Middle Eastern light and middle distillate exports declined to 2.14 MBpd in Aug’26 from 2.58 MBpd in Jul’26 and were 55% below the pre-war average of 4.49 MBpd, pushing Singapore gasoil prices up 70% to 155.15 USD/bbl and gasoil refining margins to 67.93 USD/bbl.
- China is expected to maintain refined fuel exports at 1.00 MBpd in Sep’26, broadly above the 2025 monthly average of 0.74 MBpd, as refiners benefit from higher overseas margins and easing export controls.
- Jet fuel is expected to lead at up to 0.58 MBpd, followed by diesel at 0.25 MBpd and gasoline at up to 0.17 MBpd, adding supply to Asian markets and potentially limiting further price gains.
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-Iran Hostilities Reignite, Raising Hormuz Risk: U.S.-Iran tensions remain elevated following renewed military exchanges. U.S. Central Command said Tuesday it had completed a new wave of attacks against Islamic Revolutionary Guard Corps targets, including air defense sites, radar systems and communications sites. Iranian state media said the strikes killed 18 people and injured 108, citing the country's health minister, and added that Iran retaliated by hitting Camp Titin, a U.S. Marine base in Jordan, with ballistic missiles. The renewed conflict has pushed Brent crude oil above USD 95/bbl, as concerns over potential supply disruptions and reduced shipping activity through the Strait of Hormuz added a significant geopolitical risk premium to energy markets.
Steel:
- Steel supply chains remain largely insulated from the Middle East conflict.
- Moreover, HRC prices are up by 1% on a monthly basis due to raw material price surge.
Base metals:
- Copper prices are down 1.2% on a weekly basis as Kevin Warsh's Jackson Hole speech renewed rate hike expectations citing inflationary concerns. Further, escalation in the Gulf, weak Chinese economic data, and inventory buildup is weighing on market sentiments. However, downside remains capped due to supply tightness, CME-LME spread, backwardation structure, and lowered production guidance in Chile.
- Aluminum prices are up 0.9% on a weekly basis due to renewed tensions in West Asia.
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.