Global energy markets face severe disruption as the US-Iran conflict shutters the Strait of Hormuz, driving Brent crude past $105 a barrel and sending Middle East benchmarks to record highs in March. Asian refiners scramble for alternative supplies while UK gas prices and inflation expectations climb sharply.
The military conflict between the US and Iran has effectively severed vital maritime energy corridors, triggering price surges across global crude, natural gas, and wholesale markets. With tanker traffic choked off in the vital Persian Gulf chokepoint, supply restrictions have upended traditional pricing mechanisms and forced industrial buyers to scramble for replacement cargoes from the Americas and Africa.
Strait of Hormuz Closures Halts Gulf Exports and Crushes Asian Refinery Operations
Middle East crude exports to Asia plummeted in March as the conflict brought shipping through the Strait of Hormuz to a standstill. Analytics firm Kpler reported that shipments dropped to 11.665 million barrels per day (bpd), tumbling from nearly 19 million bpd in February and sliding roughly 32 per cent below March 2025 levels.
The supply shock has rendered Middle East grades the most expensive oil in the world. Cash Dubai was assessed at a record US$153.25 a barrel on March 16 for May-loading cargoes, according to S&P Global Platts, surpassing Brent futures’ all-time high of US$147.50 set in 2008. Oman crude futures similarly jumped to a record US$147.79 a barrel.
That put Dubai’s premium to swaps at US$56.01 a barrel on March 16, accounting for about a third of the crude’s value and up from an average of 90 US cents in February, data from Reuters showed. Similarly, Oman crude futures set their premium to Dubai swaps at US$50.57 a barrel, far above February’s 75 US cents average. Dubai prices are distorted given its wide price gap with Murban futures, which settled at US$111.76 a barrel on March 16, three trade sources said.
The valuations have compressed margins for Asian refiners, many of which have been forced to scale back operating rates or seek alternatives. Spot premiums for Brazilian spot crude hit records of US$12 to US$15 a barrel to ICE Brent, while premiums for April-loading West African crude on free-on-board basis rose about US$1 a barrel from a month ago, with most cargoes sold, one of them said.
Disputed Benchmarks and Market Distortions Spark Trader Frustration
The price divergence has ignited debate among industry participants over the integrity of major crude benchmarks. Several refining sources attributed the March price spikes to thin trading conditions and the exclusion of three crude grades that transit the Strait of Hormuz from the Platts Market on Close process.
It is unnatural and unfair pricing because of thin trading,
one of the sources said, adding that the remaining grades – Oman and Murban – are not representative of the benchmark used to price Middle Eastern and also some Russian barrels.
Another refining source said May-loading Middle East crude trade has stalled, as the Dubai and Oman benchmarks are broken. The sources declined to be named as they spoke on the condition of anonymity.
Trade data indicates that TotalEnergies has been the only buyer receiving cargoes in the Platts window during March, snapping up 24 Oman and Murban crude cargoes, or 12 million barrels. In response to the growing friction, S&P Global Platts said on March 16 it is seeking immediate feedback on the deliverability of Middle East crude and Platts Dubai crude benchmark methodology.
Platts Dubai continues to reflect the value of Middle Eastern sour crude trading in the spot market,
an S&P Global Energy spokesman said in an e-mail, adding that activity during the Platts MOC has been robust in March, with multiple cargoes delivered.
Broad Economic Fallout and Inflationary Pressure Hit UK Households and Borrowing Costs
Beyond Asian refining hubs, the conflict has sent shockwaves through European energy and financial markets. Brent crude climbed back above $100 a barrel and jumped to $105, fueling fears of accelerating inflation. The price of natural gas has also been soaring on wholesale markets, with the UK rising above 200p a therm for the first time since the end of 2022. Storage levels in Europe are much lower than normal for the time of year, and the need to fill reserves ahead of the winter has helped to push up prices.
The inflationary spike has helped to push bond yields in the UK to their highest level in decades. Speaking at a Republican Party convention in Texas on Wednesday, President Trump said he did not think the fighting would end until after the US mid-term elections in November.
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