Oil markets reprice geopolitical risk amid Gulf disruptions

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Oil markets opened the week under significant geopolitical pressure following US/Israeli strikes on Iran and the regime’s subsequent attacks in the Middle East.

Brent Crude front-month closed on Monday at $77.7/Bbl, up almost $5 from Friday. Markets rallied further on Tuesday reaching $85/Bbl during the trading day and closing at $81.4/Bbl.

The repricing reflects how geopolitical developments can quickly outweigh underlying supply and demand balances. The Strait of Hormuz remains central to market concerns: roughly one third of global seaborne crude and substantial volumes of refined products pass through the waterway. Tanker traffic has largely paused, affecting not only crude exports but also shipments of diesel, jet fuel, naphtha, gasoline, and liquefied petroleum gas (LPG). A prolonged interruption would represent one of the most significant supply disruptions in recent decades.

Refined product markets have reacted even more sharply than crude, with gasoline cracks softening, highlighting growing divergence across product markets as flows through the Gulf remain uncertain.

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