In the sixth week of the military conflict in Iran, the global oil market has been hit by a massive supply shock. The blockade of the Strait of Hormuz has trapped hundreds of tankers in the Persian Gulf, triggering a sharp rise in global oil prices. Yet current oil futures are projecting a distorted and overly optimistic picture, masking the true scale of the commodity shortage.
There is now an unprecedented divergence between physical market prices (real barrels for immediate delivery) and the “paper” market (financial derivatives and futures).
Refineries are forced to buy physical crude at a historically record premium of about $30 per barrel above the nearest futures contract. This spread rarely exceeds $2 under normal macroeconomic conditions.
This abnormal pricing pattern suggests traders are unwilling to place long-term bets so that extremely high prices will hardly persist. Market participants expect the acute shortage to be short‑lived and the conflict to be frozen by a political settlement. The price gap is also driven by a calendar factor: Brent futures trade nearly two months forward (the nearest contract is June), while physical benchmarks reflect the cost of deliveries here and now.
According to analysts at Energy Aspects Ltd, exchange optimism is built on expectations of imminent US intervention. Investors are confident that President Donald Trump will find a way to end the conflict so as not to jeopardize his political standing amid soaring gasoline prices ahead of the midterm elections in November.
The economic consequences of the conflict are already being felt by consumers. In the US, the average retail gasoline price has broken the psychological $4-per-gallon mark, setting seasonal highs. More expensive fuel has sparked a new wave of global inflation: rising prices for gasoline, diesel, and jet fuel are already translating into higher airfares, logistics costs, and food prices. Polls show that a majority of American voters disapprove of military operations against Iran and are seriously worried about the economic damage from further escalation.
