Eurasia Group’s Greg Brew: The conflict in Iran is being fought in the oil market
Speakers
Greg Brew
— Senior Analyst, Eurasia Group
Summary
Greg Brew of Eurasia Group discusses the U.S.-Iran conflict as a standoff being fought in the oil market. He notes Brent front-month near $110, physical prices of $120-$150, and the Saudi East West pipeline down for weeks. He expects refined product tightness to persist, with diesel under particular pressure while gasoline rises more slowly. A potential Russia-Ukraine ceasefire on energy infrastructure could ease some pressure, but no de-escalation in the Middle East keeps energy markets tense.
- U.S.-Iran conflict described as a standoff, with pressure applied through proxies and oil markets.
- Saudi East West pipeline is down potentially for several weeks.
- Brent front-month is near $110, while physical crude prices are $120-$150.
- Diesel faces a global squeeze from tight middle-distillate refining capacity and strong demand.
- Gasoline prices are expected to rise more slowly than diesel.
- A Russia-Ukraine energy-infrastructure ceasefire could ease pressure, but Middle East de-escalation remains uncertain.
Ideas
Conflict keeps upward pressure on oil.
The U.S.-Iran conflict is effectively a standoff in which neither side wants full-scale escalation, so the contest is being fought through proxies and in the oil market. Iran is maintaining pressure in the Strait of Hormuz, Houthis and Iraqi militias are escalating, and the Saudi East West pipeline is down potentially for several weeks. This has pushed Brent front-month near $110 while physical prices are $120-$150, keeping upward pressure on energy.
Diesel squeeze persists on tight refining capacity.
The refined product side, especially diesel, is tighter than crude. Diesel faces a global squeeze from a relative shortage of refining capacity for middle distillates, higher demand for agriculture and industry, and fewer refineries able to process middle distillates than gasoline or jet fuel. Gasoline will rise much more slowly than diesel, so diesel prices should remain under pressure.
