- Iranian officials say diplomacy is continuing as both sides review proposals involving the Strait of Hormuz, sanctions, and the US naval blockade.
- Market grapevine indicates that Asia’s crude oil imports are projected to reach 23.96 MBpd in Sep’26, up from 23.38 MBpd in Aug’26 and the highest since Feb’26, but still 13% below the pre-conflict average of 27.55 MBpd, Middle East supplies rose to 12.56 MBpd from 11.66 million bpd, yet remained 3.53 MBpd below the pre-war average.
- Asian imports of light and middle distillates are expected at 5.84 MBpd in Sep’26, up from 5.25 MBpd in Aug’26 but more than 1 MBpd below the pre-conflict average of 7.06 MBpd, keeping refined-fuel prices elevated.
- Saudi Arabia restarted its East-West Pipeline at a low rate after drone attacks forced its shutdown on 11th Sep’26, with plans to restore flows toward 4 MBpd (against 7 MBpd capacity) and potentially resume Yanbu exports, although a full restart could take 6–8 weeks.
- South Korea plans to reduce its reliance on Middle Eastern crude to 50% by 2035 from 70% in 2025, while adding 20 mln bbl to crude reserves by 2030, cutting Middle Eastern natural-gas dependence below 30%, and diversifying critical-mineral and naphtha supplies after disruptions from the Iran war.
- Global crude oil floating inventories declining in Sep’26 from the previous month, indicating some easing in offshore stock accumulation after the sharp build-up seen earlier in the year.
- floating crude oil storage declined across Asia, Europe, the Middle East and North Sea, likely reflecting stronger crude movements and reduced volumes held offshore. Meanwhile, West Africa and other regions saw an increase, indicating higher export-related inventories or slower cargo movements, while the Gulf Coast remained broadly stable.
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: U.S.–Iran Talks Raise Hopes of De-escalation and Ease Oil Prices: U.S. and Iranian officials held around three hours of talks on the sidelines of the UN General Assembly in New York, with President Trump describing the discussions as “very good” and productive and indicating that another meeting could take place soon. The talks, mediated through regional officials, focused on conditions for ending the conflict and potentially reopening the Strait of Hormuz. The renewed diplomatic engagement, together with the restart of Saudi Arabia’s East-West oil pipeline and expectations of improving Gulf supply, has eased concerns over a prolonged disruption to energy flows, with Brent crude falling below USD 100/bbl and extending its recent decline.
The U.S Federal Reserve raised its benchmark interest rate by 25 bps to 3.75%-4.00%, marking its first rate hike since July 2023. The decision came amid persistent inflationary pressures, with the Fed stating that inflation remains elevated and that the latest rate increase would support a more timely return toward its 2% inflation target. The Fed’s updated projections indicate that 16 of 18 policymakers expect at least one more 25-bps rate hike by the end of 2026, taking the policy rate to 4.00%-4.25%. Policymakers also raised their 2026 inflation forecast, reflecting continued concerns over price pressures, particularly from higher energy costs. The Fed’s hawkish stance provides a positive backdrop for the USD and weigh on metal prices. This may keep the impact on INR relatively contained, with oil prices, capital flows and RBI intervention remaining key drivers.
Steel:
- Steel supply chains remain largely insulated from the Middle East conflict.
- Moreover, HRC prices are up by 6.8% on a monthly basis due to raw material price surge.
Base metals:
- LME 3M copper are up 2.5% on a weekly basis supported by high China premium, disruptions in Escondida mine, calls for strike at major Chile mining operations, and drawdown in SHFE inventory ahead of mid autumn festival. However upside remains capped by rate hike pressures, stronger dollar, and geopolitical tensions.
- Aluminum prices are down 2.3% due to gradual recovery from GCC and rate hike expectations 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 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.