Iran War Three Weeks In, US "Stabilize Oil Price" Card "Almost Played Out," Crude Oil "Futures-Spot Spread" Widening

The Iran war enters its third week, and the global crude oil market has experienced a rare “futures-spot decoupling”: Brent crude futures surge over 50% to around $112 per barrel, but the actual spot market costs are far higher—jet fuel and other refined products have already surpassed $200 per barrel.

Jeff Currie, Chief Strategist at Carlyle Group’s Energy Path, bluntly states:

“The futures market has completely disconnected from the physical market. We are facing a massive supply shock.”

The reason futures haven’t fully reflected the spot price increases largely stems from a series of policy tools the U.S. has aggressively used to suppress oil prices.

However, these tools are rapidly running out.

Spot Market: Consumers Bear a Much Greater Impact Than Futures Indicate

The Strait of Hormuz is nearly completely closed, combined with attacks on Middle Eastern energy facilities, leading to severe reductions in physical crude oil supplies. Asian refineries are forced to buy cargoes from thousands of miles away at high premiums.

The supply chain effects are now evident at multiple levels: jet fuel surpasses $200 per barrel, major European airlines say additional costs will be passed on to passengers; trucking companies are under pressure; some regions have already cut back on marine fuel purchases.

The IEA describes this event as the largest oil supply disruption in history.

Goldman Sachs estimates that about 17 million barrels per day of Persian Gulf crude flows are affected by the conflict. The actual inflationary impact far exceeds what futures prices suggest, putting pressure on central banks and the Trump administration ahead of mid-November elections.

U.S. “Price Stabilization” Tools: Nearly Depleted

In the past two weeks, Brent crude approached $120—levels not seen since 2022—forcing Washington to act decisively:

Releasing Strategic Petroleum Reserves (SPR)—a large-scale release has already been announced. Treasury Secretary Yellen said on Fox Business Thursday that a further release is under consideration, though logistical feasibility is questioned.

Lifting sanctions on Russian maritime oil exports—aiming to increase alternative supply sources.

Considering easing sanctions on Iranian oil—Yellen’s subsequent statement shocked traders already exhausted: contemplating lifting Iran sanctions while at war with Tehran. Global traders, who have long been cautious about Iran dealings, expressed surprise.

Suspected market intervention—widespread speculation that the U.S. is directly intervening in futures trading, which Yellen denied. Meanwhile, extreme volatility has increased holding costs, objectively limiting traders’ positions and exerting some pressure on futures—though the effect is limited compared to the impact of the Strait of Hormuz disruption.

Price Impact Could Worsen Further

Goldman Sachs and Citigroup warned this week that if the conflict persists, futures prices could break the 2008 record of $147.50 per barrel in the coming weeks.

It’s worth noting that long-term divergence between futures and spot prices is uncommon in history, implying that the spread will eventually narrow—though not necessarily with spot prices falling.

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