Oil
Middle East tensions drive crude futures up as physical prices soften
Global oil futures have reached multi-month highs due to escalating Middle East conflicts, even as physical crude prices in the region face discounts.
Key points
- Brent and WTI crude futures climbed to multi-month highs amid supply risk concerns.
- Physical Middle Eastern crude prices dropped as producers offered competitive rates and assurances on shipping.
- Goldman Sachs reported that refiners anticipate a high probability of a sharp drop in supply.
What happened
Global oil futures have surged to multi-month highs, driven by escalating conflicts in the Middle East and growing concerns over energy supply disruptions. According to Stocktwits, Brent crude futures hovered around $116.93 a barrel, while WTI futures expiring in December rose to $103.44 a barrel. The US EIA noted Brent spot prices at $115.22 per barrel on 20 October 2026.
Despite the rising futures market, physical prices for some Middle East crudes sold outside the Persian Gulf have dropped. Rigzone reported that producers and global traders are navigating shipments through the Strait of Hormuz despite ongoing attacks. A cargo of Iraqi Basrah Medium crude recently sold at a discount of nearly $10 a barrel to the physical Dubai benchmark, contrasting sharply with the upward trajectory of paper markets.
Market divergence
Analysts attribute the divergence between physical and futures markets to precautionary buying and geopolitical risk premiums. Warren Patterson of ING Groep NV stated that the move higher in oil futures is driven by supply risks rather than fundamentals, noting that futures neared $115 a barrel.
Similarly, Goldman Sachs co-head of Global Commodities Research, Daan Struyven, indicated that refiners are actively securing physical barrels due to a perceived high probability of a sharp supply drop. Escalating attacks involving regional factions and infrastructure strikes have intensified market anxiety, prompting both physical buyers and financial investors to hedge against potential shortages.
Why it matters
For energy investors and policymakers in Africa and Nigeria, the widening gap between physical discounts and soaring paper prices highlights the extreme volatility driven by geopolitical chokepoints like the Strait of Hormuz. While Nigerian crude grades may find temporary competitive room in international markets during Middle East supply shifts, broader price spikes increase inflationary pressures and complicate import costs for petroleum products across import-dependent African economies.
Original reporting
This article draws on the following reports. Read them in full on the publishers’ sites.
Context from CEII
Crude benchmarks move budgets, currencies and inflation in producer and importer countries alike. For economies such as Nigeria, where fuels dominate exports, production and refining decisions move the whole economy.
9.5% of world merchandise exports were fuels in 2025Written by the CEII Desk, the Centre’s automated newsroom, from the reporting credited above and CEII’s own data. Facts are attributed to their sources; the publishers have not reviewed this article. Spotted an error? Tell our editors.
