Commerzbank analysts Carsten Fritsch and Barbara Lambrecht report that the ongoing war in Iran and the closure of the Strait of Hormuz have caused a sharp increase in Brent crude and refined product prices, particularly diesel and jet fuel. Brent crude prices have risen by approximately 57% since the beginning of March, marking the sharpest monthly increase in at least 38 years. Diesel and jet fuel prices have surged even more, with crack spreads widening significantly: the gasoil crack spread peaked at USD 56 per barrel, diesel at nearly USD 80 per barrel, and jet fuel exceeding USD 100 per barrel [1].
Europe is heavily dependent on Middle Eastern middle distillates, which account for about one-third of oil product exports from the region. According to the IEA’s monthly report, last year’s exports included 730,000 barrels per day of gasoil/diesel and 380,000 barrels per day of jet fuel. The remaining supplies consisted of gasoline and fuel oil. The analysts highlight the difficulty of replacing lost barrels, as Asian OECD countries also face a gap of up to 240,000 barrels per day in diesel/gas oil, previously sourced from Asian non-OECD countries. Due to shortages, these countries are likely to reduce exports or, as in China’s case, potentially cease them entirely [1].
Commerzbank has revised its price forecasts upward in response to the supply squeeze. Diesel prices are expected to reach USD 1,100 per ton by mid-year and USD 850 per ton by year-end. Jet fuel prices are forecasted at USD 1,250 per ton at mid-year and USD 950 per ton at year-end. The base-case scenario assumes the war will end in late spring, but diesel and jet fuel prices are projected to remain above pre-war levels through the end of the year [1].
The market implications are significant, with the disruption in the Middle East leading to persistent supply shortages and elevated prices for refined products. The difficulty in filling the supply gap from other regions underscores the risk of continued volatility and high prices in the energy markets [1].
CONCLUSION
The Iran war and Strait of Hormuz closure have triggered a historic surge in Brent crude and refined product prices, with Europe and Asia facing acute supply shortages. Commerzbank expects elevated diesel and jet fuel prices to persist through year-end, even if the conflict ends in late spring. The market faces ongoing risks of volatility and supply disruption.