Oil Markets Fracture as Iran War Creates New Trade Routes

The Iran war has significantly impacted global oil and energy markets, causing a major rewrite of trade routes in decades. The conflict began on February 28, 2026, with US and Israeli strikes on Iran, leading to Iranian attacks on tanker traffic in the Strait of Hormuz. As a result, oil flows through the strait have collapsed from around 20 million barrels per day to just 2-8 million bpd.

The market has not collapsed into $150 oil as expected; instead, it has fractured. Producers are building and expanding pipelines that bypass the strait, while shuttle tankers and ship-to-ship transfers are moving barrels around the chokepoint. Russia is selling more crude to Asia at stronger netbacks, and Japan is buying from the Americas, Africa, and the Caspian.

China is using inventories as a swing tool and buying discounted barrels to capture record crack spreads. The result is a two-speed market: paper crude has retraced from April peaks above $125, while physical barrels delivered to refineries remain tight and product cracks stay extreme.