US-Israel Strikes on Iran: Impact on European Refined Products Prices

Middle Distillates

European middle distillates reacted most strongly to the weekend’s events in the Mideast Gulf, with other regional refined products markets either tracking crude gains or strengthening along certain arbitrages.

• European middle distillate flat prices rose by around 20% on 2 March, more in a single session than had been added before then since the start of 2026, taking levels to multi-year highs.
• Refiners in the Mideast Gulf are among the largest re-suppliers of jet fuel and diesel to Europe. Disruption to trade flows caused by military action was expected to affect arrivals into Northwest Europe and the Mediterranean, resulting in sharp price gains on CIF Cargoes on 2 March. Threats against tankers transiting the Straits of Hormuz saw the numbers of ships moving through the key artery fall. Attacks against two key refineries – Kuwait’s Mina al-Ahmadi and Saudi Arabia’s Ras Tanura – also heightened fears of supply disruption.
• Ukraine’s weekend attack on Russian oil infrastructure in Novorossiysk, a key distillates export hub, had earlier added to the bullish backdrop.
• Price gains for transportation and heating fuel markets outpaced by 2-3x the increase seen on Dated Brent crude, resulting insignificant rallies for crack spreads. FOB Barges indexes rose the most. Europe’s refining system will come under increased pressure to raise run rates to offset lower imports from East of Suez at a time when maintenance typically occurs.

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Light Ends

Cracks moved in opposite directions, while a key arbitrage drove the biggest price action in gasoline.

• Singapore 92 Ron gasoline swung from a -$2.35/bl discount to NWE Eurobob Oxy (E5) barges on 27 February to a +$3.52/bl premium on 2 March, as east of Suez refined products markets firmed.
• Eurobob’s crack to Brent narrowed, as crude gains outpaced those of gasoline.
• Transatlantic arbitrage firmed on paper, driven by gains in US RBOB gasoline futures.
• On the Eurobob forward curve, backwardated structure steeped at the front end on 2 March, while the rest of the curve was broadly unchanged from the 27 February.  

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Naphtha

• Physical naphtha prices in Northwest Europe rose sharply on Monday to $641.25/MT, up 9.1% on Friday’s close. The crack to Brent futures rose 4.5% day-on-day. The naphtha crack closed on 2 March at -$5.88/bl, up from -$8.06/bl a week earlier.
• Prompt swaps values also made gains, with the largest gains seen at the very front of the curve, widening backwardation:
  
  • Month1/Month2: $7.5/MT - $14.75/MT
  • Month2/Month3: $7/MT - $12.25/MT
• The price reaction on Monday was more pronounced than the initial reaction to last June’s unrest:

Propane

• NWE propane prices rose $87/MT to reach$675.25/MT, up from $588.25/MT. These gains are more than double those seen during 12-16 June 2025 (the previous period of Middle Eastern unrest).
• Butane remained at 88% of naphtha, but outright values were buoyed by naphtha.
• Front-month propane swap values rose $26.75/MT, up from $524.75/MT to reach $551.50/MT on 2 March, a smaller gain than during last June’s unrest, when propane front-month paper mirrored physical gains.

At the bottom of the barrel, much like in other markets, price action was driven by a combination of flat price-assisted moves, steeper backwardation in the curve, and a firmer theoretical arbitrage to Asia-Pacific.

• VLSFO 0.5% Barges jumped to $496.25/MT on 2March, up $33.25 on the day and $55.25 (+12.5%) over five trading days.
• HSFO 3.5% Barges rose even to $446.25/MT, up $43.25 on the day and $60.25 (+15.6%) over the same period.
• The VLSFO premium to HSFO narrowed by $10/MT to$50/MT on 2 March.
• While Singapore sources more than 25% of its fuel oil imports from the Middle East, Northwest Europe (NWE) relies on the region for only around 5% of its fuel oil supply. As a result, the de facto closure of the Strait of Hormuz has had a far more pronounced impact on Asian markets.

• During last summer’s Mideast Gulf conflict (13–24 June 2025), NWE fuel oil prices peaked on 19 June before reversing sharply by 24 June as tensions eased and risk premiums unwound.

• Both the NWE VLSFO 0.5% Barge and the NWE HSFO 3.5% Barge curves shifted up, with pronounced movements seen for the front-loading tenors.
• The backwardation has steepened dramatically for both grades:
  
  • VLSFO0.5%: Prompt-to-M24 spread widened from $27.75/MT to $56.25/MT.
  • HSFO3.5%: Prompt-to-M24 spread widened from $42.75/MT to $73.50/MT.

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