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US / Israel–Iran War · Market Update
- Iran is preparing to shift to a “fully offensive” military posture as efforts to reach a permanent peace deal with the US have stalled, threatening prolonged disruption to tanker traffic through the Strait of Hormuz, while Washington has ruled out extending the temporary ceasefire.
- Saudi Aramco is privately offering Arab Medium and Arab Heavy crude for Sep'26 loading to Asian refiners via ship-to-ship transfers off Fujairah, allowing buyers to bypass the disrupted Strait of Hormuz, in a strategy similar to ADNOC’s sale of more than 100 mln bbl through tenders.
- Market grapevine indicates that the US diesel crack reached a record 102.20 USD/bbl on 17th Aug'26 amid global supply disruptions, while global refinery throughput fell by 5.0 MBpd YoY to 80.9 MBpd in Jul'26 and the US distillate inventories dropped to 107.1 mln bbl, the lowest seasonal level since 1996.
- China recorded a 0.21 MBpd crude surplus in Jul'26 despite imports falling to 8.41 MBpd, as refinery throughput dropped 15.8% YoY to 12.51 MBpd, while crude inventories have still increased by around 0.48 MBpd year to date despite imports remaining over 3.00 MBpd below pre-war levels.
- Shipping through the Strait of Hormuz nearly ground to a halt, with only 5 commodity vessels transiting on 15th Aug'26 and none on 16th Aug'26, down from 31 the previous weekend and far below the 130+ vessels per day seen before the war, while Bab el-Mandeb traffic fell to 49 vessels from 55 and recorded no Saudi oil shipments.
- Saudi crude exports from the Red Sea are increasingly being shipped via "dark" voyages to evade Houthi attacks, with around 70% of west coast loadings operating without AIS tracking, Bab al-Mandeb vessel traffic falling to 32 ships/day from 50, and Sidi Kerir crude loadings reaching a record 2.17 Mbpd, up 50% WoW.
- Iran reportedly attacked an ADNOC vessel in the Strait of Hormuz, marking the third incident involving ADNOC vessels in less than a week, with no injuries reported, further threatening a waterway that handled around one-fifth of global oil and LNG shipments before the conflict.
- Russia suspended crude exports from the Sheskharis terminal at Novorossiysk following a drone attack, disrupting a facility handling around 0.70 MBpd, after crude loadings from the port averaged nearly 1.0 MBpd in Jul'26 and 0.80 MBpd in Jun'26.
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:
U.S.-Iran Tensions Rise as MoU Expires Without a Deal: The geopolitical tensions between the U.S. and Iran have intensified after President Trump ruled out extending the June memorandum of understanding (MoU), leaving no clear timeline for a resolution. Iran has responded firmly, while U.S. officials have signaled that Washington is prepared for a prolonged confrontation and may impose further sanctions. With talks stalled and the dispute over the Strait of Hormuz still unresolved, concerns remain over further escalation and continued disruption to regional 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 3.9% on a weekly basis, 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 which offset pressure from geopolitical uncertainty and weaker China economic data.
- Aluminum prices are down 1.7% on a weekly basis as due to subdued demand and improving supply conditions although MoU expiration may provide some support.
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.