From Spot to Curve: How European and East of Suez Markets are Responding to the U.S.-Israel War on Iran

Saket Vemprala, Managing Director of Markets for Europe and Africa at General Index, was joined by Philip Jones-Lux, Senior Analyst at Sparta. They discussed how crude and refined product markets east and west of Suez have responded to the US-Israel war on Iran. The session was recorded about two weeks after the conflict began on February 27-28. On the day of recording, Brent traded at about $119 per barrel intraday, and there were reports that loadings had stopped at Yanbu after an attack on the SAMREF refinery.

Crude flows and Asian demand

According to the IEA, about 10 million b/d of liquids production had been shut in, of which about 8 million b/d was crude. Crude loadings through the Strait of Hormuz fell to between 1 million and 1.5 million b/d, and Iranian barrels made up at least a third of what was still moving. Saudi Arabia diverted exports to Yanbu on the Red Sea, where Vortexa data showed single-day loadings of up to 6.5 million b/d before the attack.

Philip said flat prices had initially been held back by a well-supplied market, by crude already on the water, and by the Yanbu diversion. He said these measures only buy time, and the only real fix is to reopen the Strait.

GX data showed the effect in Asia:

• ESPO crude rose to more than $8 per barrel over Dubai.
• Urals delivered to India moved from a discount to Dated Brent to a premium.
• West African cargoes were offered to China at double-digit premiums to Dated Brent.

Philip said Asian refiners had been slow to buy Atlantic Basin grades. Some were wary of running unfamiliar crudes. Others found the longer voyages too difficult to hedge while they were short of base-load supply. He expected some refiners to cut runs or shut in by May.

Atlantic Basin and the WTI-Brent spread

Sour grades firmed in the Atlantic Basin. GX recorded a bid of more than $9 per barrel over Dated Brent for Johan Sverdrup, and at least one Asian refiner bought a Forties cargo. On the US Gulf Coast, sour differentials strengthened, and sour crude imports reached multi-year highs. Philip expected US Strategic Petroleum Reserve releases to reduce Gulf Coast imports, which would free Brazilian and Guyanese barrels to move east.

WTI traded about $20 per barrel below Brent. Philip said that discount was hard to justify unless the market was pricing a possible US export ban.

Pressure on the Dubai benchmark

Five grades can be delivered into the Dubai partials market. With Dubai, Upper Zakum, and Al-Shaheen locked inside the Gulf, only Murban loaded at Fujairah and Oman crude could still deliver. These two grades accounted for almost 90% of deliverable volumes in March, up from about 57% before the war. Dubai crude reached a record of more than $158 per barrel, more than $65 above the front-month swap.

Saket said attacks near both loading ports raise questions about the benchmark’s resilience. He said General Index is consulting the market on methodology options. There were also reports that refiners may ask Middle East producers to set official selling prices against ICE Brent instead of Dubai.

Refined products

Middle distillates were hit first. The Singapore regrade spread reached record highs. Chinese product exports were curtailed, and Korea limited exports to 90% of 2025 levels. Philip said India and the US Gulf Coast cannot fill the gap. Some Reliance diesel cargoes that had arrived in Europe were sent on to Singapore.

In Europe, April jet fuel was priced about $440/mt above diesel, at around $1,700/mt. That compares with $700 to $750/mt in late February. Airlines had begun cancelling flights. Philip said hedging offers limited protection if physical jet fuel is not available.

East of Suez demand also pulled other products:

• Fuel oil: The east-west spread for 0.5% sulfur fuel oil reached record levels. Diesel was close to being cheap enough to blend into bunker fuel.
• Gasoline: The east-west spread widened from $2 to $3 per barrel to $6 to $7 per barrel. This opened arbitrage routes from Europe to East and South Africa, Pakistan, Indonesia, and Singapore.
• Naphtha: Naphtha reacted first. Lump-sum LR freight rates from Europe to the Far East rose from about $5 million to about $9 million, and the trade still worked.

Outlook and audience questions

Saket said the conflict is likely to change how the market prices transits through Hormuz and Bab el-Mandeb, even after it ends. Philip said deferred product cracks had not yet priced in a prolonged disruption.

Asked about a possible US product export ban, Philip said it would lower US domestic prices and refinery runs. It would also sharply tighten global supply of clean fuels and be strongly bullish for European gasoline. On refinery runs, he noted that Japanese utilization had already fallen from about 81% to 65%. Most refineries would have to shut down below about 60%.

Watch the full webinar below.