Oil Industry Braces for Years-Long Iran War

Oil producers, traders and refiners at this year’s Asia Pacific Petroleum Conference (APPEC) are preparing for a prolonged war between the United States and Iran, with little expectation of a quick settlement. Market participants told Reuters and conference speakers said the disruption has already pushed Brent and WTI above $100 a barrel and sharply raised physical transportation and insurance costs.

By AI NewsroomPublished about 4 hours agoUpdated about 4 hours ago0 views

Why It Matters

A sustained conflict in the Persian Gulf would keep crude and fuel prices elevated, strain refining capacity and force costly shipping workarounds that tighten supply chains — raising costs for consumers and industry globally. Those effects are already visible in record tanker rates, surging physical premiums and widening supply bottlenecks highlighted by market reporting.

Key Facts

Event: Asia Pacific Petroleum Conference (APPEC)
Source reporting mood at APPEC: Reuters columnist Clyde Russell
Brent price: Above $100 per barrel
Russia ESPO premium to Brent: About $20 per barrel (Bloomberg)
VLCC benchmark daily rate (Middle East to China): Nearly $800,000 (Bloomberg data)

Executives, traders and refiners attending APPEC say they are bracing for a long-running conflict between the United States and Iran that could last well beyond the near term. Reuters reporting from the conference characterized the mood as pessimistic, with delegates warning that neither side appears willing to accept anything short of an apparent victory, making a quick political settlement unlikely.

The conflict has already pushed headline crude benchmarks above $100 a barrel and is shifting market focus from futures to physical prices. Bloomberg data cited at the conference showed Russia’s ESPO blend trading at roughly a $20-per-barrel premium to Brent as buyers seek supplies outside Gulf channels. Market participants point to the U.S. naval blockade of Iranian ports and disruptions to Venezuelan flows as key factors narrowing buyers’ options.

Shipping and insurance costs have surged as operators take longer, less efficient routes to avoid Persian Gulf risks. Freight for a very large crude carrier on the Middle East–China run hit an unprecedented near-$800,000 daily benchmark, while Reuters reported freight on Gulf-to-North-Asia voyages jumping to about $30 per barrel from $6 and insurance rising to $2.50 per barrel from $0.05. Those added costs are raising the effective price of delivered crude and prompting Gulf producers to offer discounts just to move barrels.

Refiners face parallel pressure: companies have run plants at elevated rates to replace lost Middle East and Russian output, but executives such as Vitol’s CEO Russell Hardy warned there is not enough global refining capacity to fully offset the shortfalls. Conference delegates said the resulting fuel squeeze will deepen if the Strait of Hormuz remains contested. Many at APPEC expect the disruption to persist through the U.S. midterm cycle, with several attendees telling Reuters they view political change in Washington as the more likely path to a shift in U.S. policy than rapid change in Tehran.