Archive · 18 Jul 2026
Geopolitical Tensions Drive Oil Price Surge
The recent attacks between the US and Iran have caused crude oil prices to rise again.
The Strait of Hormuz, a crucial shipping route, is back in the spotlight, affecting oil supplies.
Unlike previous price surges, this time the price behavior of different types of crude oil contracts is different.
The crack spread, which measures the profit margin for refiners, has stayed high.
This is because there are supply issues with refined products like gasoline and diesel, not just crude oil.
The article explains why this is happening and what it means for oil prices.
It also talks about how the current situation is different from past disruptions and the risks involved if the tensions continue.
Geopolitical tensions between the US and Iran have led to a surge in crude oil prices.
The Strait of Hormuz disruption has caused a different price behavior in Dated Brent and Brent futures compared to previous rallies.
The crack spread, reflecting refinery margins, has reached a record high due to supply constraints in refined products.
Inventories of distillates and gasoline are below the five-year average, contributing to the tightness in refined product markets.
OPEC's spare production capacity has significantly decreased, raising concerns about the market's ability to handle further disruptions.
- Who
- US and Iran
- What
- Geopolitical tensions and crude oil price fluctuations
- When
- July 7, 2026
- Where
- Strait of Hormuz, global oil markets
- Why
- Escalation of attacks between the US and Iran, leading to increased geopolitical risk and crude oil price volatility
Supply Constraints
Demand Factors
Crack Spread Elevation
Supply Constraints
The elevated crack spread is primarily due to supply constraints in refined products, particularly distillates, driven by disruptions in Russian refining operations and lower inventories.
Demand Factors
The high crack spread could also be influenced by increased demand for refined products, especially in regions with longer shipping routes.
Crude Oil Price Behavior
Supply Constraints
The recent rally in crude oil prices is driven by precautionary risk premium due to geopolitical tensions rather than immediate physical shortages.
Demand Factors
The price behavior of Dated Brent and Brent futures suggests that market expectations and speculative trading are playing a significant role in the price increases.
- Dated Brent Surge
- 45% surge in early March during Strait of Hormuz closure
- Brent Futures Rally
- 22% rally since recent escalation
- Crack Spread Peak
- $69.16/barrel on July 15
- Distillate Inventories
- 12% below five-year average
- Gasoline Inventories
- 6% below five-year average
- OPEC Spare Capacity
- 0.44 million barrels/day in 2026
- Global Refinery Throughput
- 6 million barrels/day lower than a year ago