Hormuz Oil Flows Rise Amid US-Iran Standoff, Prices May Correct by 10-15%
The global crude oil prices have remained high due to the ongoing standoff between the US and Iran. Despite efforts by mediators, both sides are holding firm on their demands, which has kept risk premiums embedded in the prices. As a result, dated Brent prices are hovering around $120/b, while Brent futures are trading in the range of $100-105.
The positive news for global markets is that crude oil flows from the Strait of Hormuz have increased to an average of above 10 million barrels per day (mbpd), according to shipping tanker tracker data. This could lead to sharper corrections if US-Iran signals any negotiations ahead of the US-Midterm election.
The world is facing acute shortages of petroleum products due to ongoing conflicts between Ukraine and Russia, as well as Iran-US tensions. This has pulled global crude oil processing down by 3.5-4 million barrels per day. The refining output of Ukraine-Russia has fallen to 2.5 mbpd in August from 5.5 mbpd in 2025.
US energy producers have capitalised on the higher crack spreads in Europe and exported diesel to maximum capacity this summer, but this has led to shortages in domestic markets, driving up prices to $6.5/gallon from pre-war levels of around $3-3.5/gallon.