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Iran Conflict 2026
12JUN

Brent at $112: 66% above pre-war price

3 min read
09:18UTC

Bloomberg data shows refiners paying a record $14.20 premium for immediate crude delivery, putting the effective cost of oil past $126 — a gap between benchmark and reality that has never been wider.

ConflictDeveloping
Key takeaway

Record physical-market backwardation signals genuine scarcity that headline futures prices structurally understate.

Brent Crude closed at $112.19 on Thursday — up from the $108.65 settlement earlier in the week and 66% above the pre-war $67.41. The price has climbed in every sustained period since hostilities began on 28 February. But the benchmark number understates what buyers are actually paying for physical crude.

Bloomberg reported a $14.20-per-barrel premium on spot physical barrels over next-month futures — the widest backwardation in the history of the Brent contract 1. At that spread, refiners are paying an effective $126 or more per barrel for immediate delivery rather than waiting even one month for cheaper futures-dated crude. Futures markets price expectations; spot markets price what is available now. The record gap between them is a measure of physical scarcity, not speculative positioning. When refiners accept a $14 surcharge to skip the queue, the queue itself is the story.

Iraq's declaration of Force majeure on all foreign-operated oilfields — dated 17 March — removed roughly 3.3 million barrels per day of pre-war export capacity from a market already short from the Hormuz disruption, where Gulf exports have fallen at least 60% since late February . Iraqi storage hit capacity; production cuts followed. Daan Struyven, Goldman Sachs's head of oil research, warned Brent could exceed its 2008 all-time intraday record of $147.50 if Hormuz flows remain depressed for 60 days 2. Three weeks have elapsed. Ann-Louise Hittle of Wood Mackenzie and Vandana Hari of Vanda Insights have both forecast $150 or higher .

US gasoline stood at $3.84 per gallon before Thursday's close — up $0.86 from pre-war levels . Diesel had crossed $5.00, its highest since 2022 . With spot crude effectively at $126, retail fuel prices have not yet caught up to the physical market. Chatham House assessed that if the conflict persists for months, Brent could reach $130 and the eurozone would "probably" contract in Q2 . Every week the Hormuz disruption continues, the distance between those forecasts and observed prices narrows.

Deep Analysis

In plain English

Oil markets operate on two price layers: futures contracts (delivery next month) and spot prices (right now). When spot prices soar above futures, it means buyers are desperate enough to pay a premium for immediate physical delivery. A $14.20/barrel gap is the widest ever recorded. This tells analysts that refineries are not managing a price shock — they are scrambling to source physical barrels to keep operating at all. The headline Brent figure of $112 understates the true cost refiners are actually paying today.

Deep Analysis
Synthesis

The simultaneous Hormuz disruption and Iraqi force majeure means roughly 20–25% of seaborne global oil is effectively offline. Record backwardation signals that physical markets are not pricing this as temporary — they are treating it as a durable supply-destruction event, not a spike to be hedged through and waited out.

Root Causes

Decades of underinvestment in non-Gulf production capacity concentrated global refining infrastructure in coastal markets directly exposed to Gulf disruption. IEA emergency releases in 2022–23 consumed strategic reserve buffers without triggering the structural supply diversification that would have cushioned this crisis.

Escalation

Iraq's force majeure compounds the Hormuz chokepoint by removing a second major export corridor simultaneously. The backwardation record is the physical market's signal that supply has crossed from disrupted to acutely scarce — a qualitatively different condition from an elevated-risk environment that can be hedged through.

What could happen next?
  • Consequence

    Petrol and diesel retail prices will rise sharply within two to three weeks as refiners pass on $126+ effective crude costs.

    Immediate · Assessed
  • Risk

    Airlines and shipping firms with unhedged or short-dated fuel exposure face acute liquidity pressure if the physical premium persists beyond 30 days.

    Short term · Assessed
  • Risk

    Emerging markets without fuel subsidies face demand destruction and currency stress as dollar-denominated oil costs surge beyond affordable levels.

    Medium term · Suggested
  • Precedent

    Record physical backwardation establishes a market signal that the disruption is structural, with implications for how insurers and lenders price Gulf-region exposure going forward.

    Long term · Suggested
First Reported In

Update #43 · Trump floats wind-down, deploys 2,200 more

CNBC· 21 Mar 2026
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Causes and effects
This Event
Brent at $112: 66% above pre-war price
The record physical premium reveals that the Brent benchmark is no longer an accurate measure of real-world oil costs. Refiners are bidding against each other for shrinking physical supply, and the widest backwardation ever recorded signals structural shortage that three weeks of emergency interventions have not resolved.
Different Perspectives
Oil markets and Lloyd's of London
Oil markets and Lloyd's of London
Brent fell to $89.25 on ceasefire probability, not new barrels, with traders voting for Trump's deed over Tehran's denial. Lloyd's has not repriced Hormuz war-risk cover because its trigger requires a UN Security Council resolution or government certification, so tanker insurance costs remain elevated regardless of the spot move.
Pakistan and Qatar mediators
Pakistan and Qatar mediators
Pakistan's Mohsin Naqvi was in Tehran for his second visit in under a week, using the Pakistan-Qatar channel that delivered April's ceasefire after an identical public-denial cycle. The channel carries both civilian and military buy-in from Islamabad, the only configuration Iran's split command cannot dismiss as a partial signal.
India
India
India summoned the US Deputy Chief of Mission after three Indian sailors were killed aboard MT Settebello, the first formal grievance from a major non-belligerent directed at US enforcement. Indian seafarers supply roughly 12 per cent of the global maritime workforce; their presence on third-flag Gulf tankers is structurally inevitable regardless of bilateral diplomacy.
Islamic Revolutionary Guard Corps (IRGC)
Islamic Revolutionary Guard Corps (IRGC)
The IRGC declared Hormuz closed on 11 June while civilian negotiators were on the same mediation channel, then issued no public comment on the MoU framework. Its silence on the framework, rather than any foreign ministry statement, is the operative approval signal; the corps' unilateral Hormuz closure shows it did not treat the diplomatic track as binding on its operations.
Iran foreign ministry (Baghaei)
Iran foreign ministry (Baghaei)
Esmail Baghaei told IRNA that reports of a finalised deal were 'merely speculation' and that Iran had 'not yet made a final decision'. The denial is structurally identical to Iranian foreign ministry statements during the April ceasefire talks, which produced a binding text within 48 hours of the same language.
Trump administration / CENTCOM
Trump administration / CENTCOM
Trump cancelled the third strike day and called the MoU 'very strong' and almost ready to sign, while CENTCOM kept tanker enforcement running in the same 24-hour window. The administration is simultaneously withdrawing the military pressure it claims drove the deal and sustaining the enforcement campaign it is trying to trade away.