The Strait of Hormuz reopening is unlikely in the short term, as refiners are paying huge premiums to scramble for other crude oils.

To address the shortfall in Middle East supply, refineries are scrambling to buy crude oil from other regions, paying increasingly high premiums for it, and signs that the Iran war has triggered major turmoil in global markets are becoming even more evident.

Besides well-known crude oil futures markets such as Brent crude oil and West Texas Intermediate, there are hundreds of lesser-known crude streams whose prices typically are only about $1 to $2 higher or lower than the international benchmark.

But now, these price spreads are rapidly widening into premiums of $10 per barrel or more, as refineries—especially those in Asia—are urgently trying to secure replacement supplies.

Spot crude oil premiums matter because they reflect the balance between supply and demand, influence refineries’ procurement decisions, and drive the direction of trade flows.

These prices indicate that another bottleneck has emerged in the global energy industry system, with the most important oil shipping chokepoint— the Strait of Hormuz—effectively shut, and following attacks launched by Iran on infrastructure in neighboring countries.

Traders said that in Southeast Asia, premiums versus prompt Brent for smaller-scale production crudes such as Malaysia’s Labuan crude, Indonesia’s Minas crude, and Vietnam’s White Tiger crude have risen to more than $10 per barrel. They said that in normal times, the prices of these crudes typically differ from the benchmark by only a few dollars.

Meanwhile, on a delivered-at-port basis, the trading premium of U.S. crude oil arriving in Asia versus prompt Brent has reached $12 to $15 per barrel—levels not seen for years. With gains in refined product prices exceeding those of crude oil, refineries can still earn very high refining margins as long as they can find crude oil.

“As events unfold, over the past few weeks the entire refining industry may have had some hesitation to varying degrees,” said Neil Crosby, head of research at Sparta Commodities, “but now it is becoming increasingly clear that the Strait of Hormuz will not reopen for the time being, and the crack spreads are so high that refiners can start buying crude oil in big amounts.”

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