The conflict in Iran has not only skyrocketed crude oil prices in the futures markets. What is truly revealing is what is happening in a less visible but much more decisive field: the physical oil market, where real barrels are traded, with a destination and delivery date. And there, the situation is extreme.
Dated Brent marks uncharted territory
Dated Brent – the benchmark that sets the price of most of the physical oil traded in the world – reached $144.42 per barrel in early April, according to data from Platts (S&P Global Energy), a level never before recorded. Days before, this same indicator had already exceeded $141, marking its highest level since 2008.
The most significant thing is not only the price itself, but what happens underneath: in the pricing window that feeds Dated Brent, 12 consecutive unanswered offers for crude oil shipments were recorded. That is, there are buyers willing to pay, but they cannot find barrels available. This disconnection between paper and physical reality is the clearest warning sign that the market is on the limit.
The gap between futures and physical: a historical premium
Typically, the price of oil in the futures markets and the physical market move in a relatively coordinated manner. But the war has broken that synchronicity. While Brent futures fluctuate around $95-98 per barrel, Dated Brent has surpassed $140. That difference—the “premium” to the physical market—reflects a real shortage of crude oil available for immediate delivery that has no recent precedent.
The center of gravity of the oil market has shifted. Algorithms and speculative bets on futures funds no longer rule. It dictates who has barrels, where they are and if they can reach their destination.
Hormuz: the bottleneck that explains everything
The Strait of Hormuz remains effectively closed, with Tehran demanding military approval for the passage of ships. Approximately a quarter of the world’s maritime oil trade and nearly a fifth of global consumption transit through this corridor.
Traffic was drastically reduced due to the risk of attacks on oil tankers and the difficulties in contracting maritime insurance to cover war risks. Without insurance, there are no boats. Without ships, there is no crude oil. It’s that simple.
During the early days of the conflict, about 20% of the world’s supply was disrupted, a proportion that far exceeds the previous record recorded during the Suez crisis of 1956-1957, according to Rapidan Energy.
Why is this crisis different?
In previous oil crises — the 1973 embargo, the 1990 Gulf War — there was a cushion: Saudi Arabia and other Gulf producers maintained millions of barrels a day of idle capacity that they could quickly activate to stabilize prices.
The current scenario is radically different. The zone affected by the war includes precisely the countries that concentrated this reserve capacity, which eliminates the traditional mechanism that historically contained price increases. In addition, attacks on Saudi facilities have reduced production capacity and cut flow on the East-West pipeline, the alternative route to the strait.
What does the physical market tell us that futures don’t?
Oil futures are financial contracts. They reflect expectations. The physical market, on the other hand, reflects reality: barrels available today, refiners that need crude oil this week, ships that cannot set sail. When the physical premium over futures shoots up to historic levels, the message is unmistakable: the actual supply is much tighter than the trading screens suggest.
For investors and analysts who follow futures as a guide, this divergence should be a wake-up call. The paper market can correct in a matter of hours by a tweet or a rumor of a ceasefire. But physical shortages cannot be resolved with quick diplomacy. As Wood Mackenzie’s Simon Flowers warned, even when the conflict ends, getting the supply chain up and running will not be a quick process.
The countdown has already begun
Rapidan Energy estimates that global demand, at about 105 million barrels a day, would have to be reduced significantly to restore balance if the disruption persists, with prices that could be sustained near $150 a barrel.
Meanwhile, the knock-on effects already extend beyond crude oil: aluminum, steel, fertilizers and natural gas are also suffering from severe shortages linked to the closure of Gulf routes. The global supply chains that depend on that 54-kilometer corridor next to Iran are showing a vulnerability that few had appreciated.
The physical oil market is shouting what futures are still whispering. And in this war, the royal barrels are the ones who have the last word.