Impact Assessment of US/Israel-Iran Conflict

Crude Oil Market Update

• China continued to build its massive stockpile of crude oil in Apr'26, even though imports dropped to the lowest in nearly four years. China's surplus crude amounted to about 0.43 MBpd in Apr'26 as the 20% drop in imports was outweighed by refinery processing sliding to the lowest since Aug'22.
• The ongoing building of inventories by the world's biggest crude importer underlines that China is in quite a different situation to the rest of the world, which is burning through oil stockpiles in order to compensate for the loss of about 12 MBpd of supply to the effective closure of the Strait of Hormuz.
• Two Chinese supertankers carrying 4 mln bbl of Middle East crude oil exited the Strait of Hormuz on 20th May'26 after waiting in the Gulf for over two months. The ships are among a handful of supertankers carrying Iraqi crude exiting the Gulf this month via a transit route that Iran has ordered ships to use. The vessels are expected to reach their destinations in China to discharge their cargo by 05th Jun'26.
• Saudi Arabia is expected to burn more imported fuel oil for power generation this summer due to a loss of natural gas supply from oilfields shut after Iran's war curbed oil exports. The rise in fuel oil use at power plants marks a setback for the kingdom's push to switch to cleaner fuels. The burning of crude and fuel oil for power could breach 1 MBpd this summer, countering efforts to switch to more gas and renewables.
• A Ukrainian drone attack on a Moscow oil refinery over the weekend has temporarily halted operations, with the facility expected to take several days to restart. The strike caused little damage to the plant, but operations were stopped as a precaution.
• The refinery, owned by Gazpromneft, processes 11.6 million metric tons of crude oil annually and produces 2.9 million tons of gasoline, 3.2 million tons of diesel, and 1.3 million tons of bitumen.
• The US Treasury Secretary announced a 30 days extension of a sanctions waiver allowing purchases of Russian seaborne oil to aid 'energy-vulnerable' countries affected by the Iran war. The waiver will allow access to Russian oil and petroleum products stranded on tankers without violating severe US sanctions on Russian oil majors.
• China's Apr'26 crude oil throughput fell 5.8% from a year earlier to 13.3 MBpd, the lowest since Aug'22, due to the Iran war curbing refinery runs. China's Apr'26 oil imports dropped 20% YoY to 9.36 MBpd, the lowest level in almost four years, a steeper decline than the drop in oil throughput.

War Impact on Crude Oil & Gasoil/Diesel Prices

War Impact on Gasoline, ATF & Natural Gas Prices

Strategic Petroleum Release

Key Supply Infrastructure

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.

Supply Analysis


Supply & Demand Analysis

War Scenarios Point to Global Supply Deficit of 1.35–1.90 MBpd in 2026 and AMJ Quarter Most Severe with a deficit of 3.00 - 4.50 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 to remain on a progressive note and flows through the Strait of Hormuz improving over the coming weeks; however crude oil production losses will be there due to further non-availability of storage on on-shore in Iraq, Kuwait and other small Middle East nations.
• Scenario 2 (Alternate): No major deal being achieved from ceasefire talks and post completion of ceasefire talks, tensions continuing to remain in the Middle East and flows through the Strait of Hormuz continuing to remain restrained. Crude Oil Production Facilities & Refining Centers in the Middle East region getting affected and trade disruptions in Strait of Hormuz will be there for medium to long term (4 to 7 months).

Price Outlook

Brent Crude 1M Futures are expected to trade in a range of 100 USD/bbl to 125 USD/bbl over the coming 1 to 2 weeks. The coordinated SPR release and GCC bypass capacity provide a meaningful supply cushion that limits sustained upside beyond these levels.

Metals & Energy Market Update – Geopolitical Context (Iran Conflict)

Geopolitical backdrop: U.S.-Iran ceasefire negotiations advance, but long-term deal remains uncertain, extending uncertainty in the region and sustaining volatility across commodities.

The United States and Iran are reportedly approaching a limited short-term ceasefire agreement aimed at preventing further escalation in the Middle East conflict, although prospects for a comprehensive settlement remain constrained by persistent disagreements surrounding Iran’s nuclear program and its stockpile of highly enriched uranium. Current negotiations, are focused on establishing an interim framework that would formalize a cessation of hostilities, ensure the reopening and stabilization of shipping flows through the Strait of Hormuz, and create a 30-day window for broader diplomatic negotiations. Nevertheless, substantial gaps between Washington and Tehran continue to limit visibility on a durable long-term resolution.

Steel:

• Domestic steel prices have moderated from recent highs.
• Steel supply chains remain largely insulated from the Middle East conflict.
• Hot-rolled coil prices declined by ~INR 1,800/ton in April ’26, ending at ~INR 57,850/ton (BigMint).
• Initial war-driven risk premium has been partially unwound.

Base metals:

• Copper ended last week up by 7%, primarily due to supply risks linked to sulphuric acid and Grasberg mine.
• Aluminum rose by 0.2% linked to Gulf region supply disruptions. However, demand softness now driving price action.
• IMF downgraded 2026 global growth to 3.1% (from 3.3% earlier and 3.4% in 2025), highlighting war-related downside risks.

Precious metals:

• Volatility has eased, but prices face upward pressure, due to improving market sentiment in peace talks.
• However, any esclation and halt in a resolution will pressure on Precious Metals.
• Stronger U.S. yields and weak industrial offtake—especially auto—are suppressing any upside momentum.

LPG Market Update

LPG Market Update - 21 May 2026

• Comments by Donald Trump indicating that US-Iran negotiations were in the “final stages” triggered a sharp correction in LPG markets. Propane at Mont Belvieu Enterprise (non-TET) declined from USD 413/ton to USD 384/ton, while butane fell from USD 625/ton to USD 543/ton.
• Despite the easing in crude and LPG prices, underlying market fundamentals remain firmly bullish. Global LPG balances continue to be constrained by severe logistical disruptions and limited vessel availability. The Strait of Hormuz remains heavily restricted, while congestion at the Panama Canal and continued security risks in the Red Sea are lengthening voyage durations and significantly increasing freight costs.
• India remains the most exposed major LPG importing market. The country is currently facing an estimated supply deficit of approximately 400,000 b/d, as import volumes remain substantially below pre-crisis levels despite domestic production operating close to capacity limits.