The oil futures paper market is likely underestimating the massive supply disruption that a closed Strait of Hormuz is creating in physical crude and fuel supply globally.

Crude futures prices briefly spiked early this week to $119 per barrel, before retreating to the $90s and trading at $100 a barrel early on Friday in Asian trade.

However, the premium of physical Dubai crude has surged to $38 per barrel over its paper equivalent, according to data compiled by Reuters columnist Clyde Russell.

The wide gap between paper and physical prices suggests that supply is being immediately choked off.

But traders on the paper market appear to believe that the record-high emergency stocks release and the U.S. Administration’s scrambling to calm the markets with comments that the war will end soon would ease the upward pressure on oil prices.

Analysts started expressing views that $200 oil is not a fantasy anymore—with 20% of global oil supply choked at the Strait of Hormuz buyers are racing to procure physical cargoes, refiners in Asia consider cutting processing rates, and Asian countries restrict fuel exports.

As a result, jet and diesel cracks soared to never-seen highs, leaving entire regions such as Europe in a shocking shortfall of middle distillates.

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Hours after announcing the biggest-ever coordinated emergency release of oil stocks, of 400 million barrels, from reserves, the International Energy Agency warned that the Middle East war is creating the biggest supply disruption in the history of the oil market.

The IEA-coordinated release will take weeks and possibly months to reach the market. The U.S. release of stocks as part of the IEA action will take about 120 days to complete, ING’s commodities strategists Warren Patterson and Ewa Manthey said.

“If you assume a similar timeline for other countries, that works out to 3.3m b/d – far short of the supply losses we are seeing from the Persian Gulf,” they noted.

With limited capacity available to bypass the crucial Strait of Hormuz and storage filling up, Gulf producers have slashed their combined oil output by at least 10 million barrels per day, the IEA said in its monthly Oil Market Report on Thursday.

In addition, over 3 million barrels per day of refining capacity in the Gulf region has already shut due to attacks and a lack of viable export outlets.

“Runs elsewhere will be increasingly limited due to feedstock availability,” the IEA warned.

The coordinated stocks release, while a record-high since the agency was created in the 1970s, wouldn’t go far to help supply in most of developing Asia, where neither China nor India, the top crude importers, are IEA members. China has some buffer to withstand part of the supply shock, but Indian stockpiles are among the lowest in the region.

The U.S. Treasury moved to allow, until April 11, purchases of Russian crude stuck in tankers in floating storage. China and India will likely compete fiercely for this supply. And still, it will not come close to offsetting the massive loss of Middle Eastern supply, most of which goes to Asia.

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“Asia’s alternative crude supply sources are severely limited, with both China and India competing for Russian crude,” said Sushant Gupta, Research Director, Asia Pacific Refining and Oils at Wood Mackenzie.

“Asian refiners will struggle to fulfil crude buying requirements for April, leading to run cuts across the region. Refiners will be dipping into their buffer stocks, which is typically up to 15 days of their needs,” Gupta added.

“Eventually, most countries will need to fall back on strategic petroleum reserves if the conflict continues.”

The conflict doesn’t look to be ending soon, despite the Trump Administration’s efforts to convince the market of the contrary and play down the spike in oil and gasoline prices.

Early this week, analysts at Wood Mackenzie said that Brent Crude prices could surge to $150 per barrel in the coming weeks.

“However, supply volumes at risk this time are dimensionally bigger – and real,” unlike in the 2022 Russian invasion of Ukraine, when supply was free flowing and just had to redirect to China and India, according to WoodMac.

“In our view, US$200/bbl is not outside the realms of possibility in 2026,” the analysts said.

The Trump Administration is scrambling to contain the fallout on prices. Energy Secretary Chris Wright on Thursday told CNN that oil prices are unlikely to hit $200 per barrel, “but we are focused on the military operation and solving a problem.”

At the same time, Wright told CNBC that the U.S. Navy is not ready to begin escorting oil tankers through the Strait of Hormuz.

While the paper market reacts to comments and attempts at assurances, the physical crude market is flashing signs of stress and distress as a large portion of global oil supply is now off the market for weeks, possibly months.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com

Oil prices today are already sitting at a dangerous level for the global economy. WTI crude oil (CL00) trades near $99.30, while Brent crude futures (BZC00) hover around $99.29 per barrel. Both benchmarks have surged toward the psychological $100 level as the Middle East conflict intensifies.

The latest flashpoint is Iran’s Kharg Island, a small coral island in the northern Persian Gulf, roughly 15 miles off Iran’s mainland coast. Despite its size, the island is the single most important export hub in Iran’s oil industry. Nearly 90% of Iran’s crude oil exports pass through Kharg Island, making it a vital artery for global energy markets.

The facility can load roughly 7 million barrels of oil per day onto tankers and has storage capacity of around 30 million barrels. Pipelines carry crude from Iran’s giant fields — Ahvaz, Marun, and Gachsaran — directly to the island’s loading terminals.

Iran currently produces about 3.3 million barrels of crude oil daily and roughly 1.3 million barrels of condensate and liquids, accounting for about 4.5% of global oil supply. Most of that oil moves through Kharg Island before tankers sail through the Strait of Hormuz, the world’s most important oil shipping lane.

With about 20% of global oil and gas shipments passing through the Strait of Hormuz, any military escalation involving Kharg Island could send shockwaves through global energy markets. Analysts say a direct strike on the island’s oil infrastructure could trigger one of the biggest oil price spikes in years, pushing Brent crude and WTI crude futures well above $100 per barrel.

Why Kharg Island is the choke point of Iran’s oil exports and a major driver of global oil prices today

Energy analysts often describe Kharg Island as the choke point of Iran’s oil export system. That label reflects the island’s extraordinary role in the country’s energy economy. Every day, millions of barrels of crude flow through pipelines from Iran’s largest oil fields to massive storage tanks on the island. Tankers dock along long jetties that extend into deep water, allowing super tankers to load quickly and transport crude to Asia and global markets.

Satellite tracking services report that oil tankers have been loading almost continuously at Kharg Island since the war began. In the weeks before the latest military strikes, Iran reportedly increased exports sharply, attempting to move as much oil as possible before potential disruptions.

Current estimates suggest around 18 million barrels of crude are stored on the island, ready to be shipped.

Because almost all Iranian exports depend on this facility, destroying or disabling it could immediately halt most Iranian oil exports. For global markets, the result would be a sudden supply shock.

Even though Iran represents roughly 4–5% of global oil supply, losing those barrels would tighten an already fragile market.

US strikes on Iran and Kharg Island tensions: How oil prices today reacted in Brent crude and WTI futures

Oil markets react quickly to geopolitical shocks. The latest US and Israeli strikes on Iranian energy and military sites have already triggered a sharp response.

After the attacks, Brent crude futures surged above $103 per barrel, while WTI crude oil jumped above $101, reaching the highest levels since mid-2022.

Even though the recent US bombing raids targeted military facilities on Kharg Island, officials confirmed that oil infrastructure and export terminals were not hit. However, the threat remains very real.

President Donald Trump warned that the US could strike Iran’s oil infrastructure if Tehran continues blocking ships through the Strait of Hormuz. That warning alone has injected enormous uncertainty into energy markets.

Oil traders know that Kharg Island represents a critical vulnerability in Iran’s energy system. If its export terminals were destroyed or severely damaged, global oil supply could tighten dramatically.

That risk explains why oil prices today remain extremely sensitive to every development in the Middle East conflict.

Strait of Hormuz crisis and Iran conflict: Why global oil prices today face a major supply shock risk

The Kharg Island crisis cannot be separated from the Strait of Hormuz, which serves as the main gateway for oil shipments from the Middle East to global markets.

Under normal conditions, roughly 20% of the world’s oil and liquefied natural gas flows through this narrow maritime corridor. The route connects major producers such as Saudi Arabia, Iraq, Kuwait, the United Arab Emirates, and Iran with customers across Asia, Europe, and the United States.

However, since the conflict escalated, shipping traffic through the Strait of Hormuz has slowed dramatically, with many tankers avoiding the region due to security risks.

If Iran continues threatening or blocking vessels, the market could lose access to millions of barrels per day of crude supply.

Energy strategists warn that the combination of Strait of Hormuz disruption and potential damage to Kharg Island could create one of the most severe oil supply crises in recent history.

In such a scenario, analysts believe oil prices could surge far beyond $120 per barrel, particularly if regional energy infrastructure becomes a target.

Oil price forecast: Could Brent crude and WTI oil prices surge above $120 if Kharg Island is attacked?

The biggest question facing energy markets today is simple: what happens if Kharg Island’s oil facilities are directly attacked?

Many analysts believe the price impact could be dramatic. Destroying the island’s export infrastructure would effectively cut off Iran’s main oil revenue stream and remove millions of barrels from global supply.

Some forecasts suggest oil prices could spike above $120 per barrel in the short term. In a worst-case scenario involving broader regional escalation, crude prices could climb even higher.

Rebuilding Kharg Island’s oil facilities would not be easy either. Experts estimate repairs could take many months or even more than a year, especially because international sanctions limit Iran’s access to technology, funding, and engineering support.

That means any disruption could have long-lasting consequences for global oil supply.

Global oil market outlook: Why Kharg Island could decide the next move in oil prices today

Right now, the global oil market is watching one small island in the Persian Gulf.

Kharg Island processes roughly 90% of Iran’s oil exports, making it one of the most important energy hubs in the Middle East. With Brent crude and WTI crude already trading near $100, the threat to this facility has become one of the biggest risks facing global markets.

If Kharg Island remains operational, oil prices may stabilize as traders wait for geopolitical clarity. But if the conflict escalates and the island’s oil infrastructure becomes a target, the world could face a major supply shock.

That outcome would push global oil prices sharply higher, increase gasoline costs worldwide, and intensify inflation pressures across major economies.

FAQs:

Where is Kharg Island located?
Kharg Island lies in the northern Persian Gulf, about 15 miles (25 km) off Iran’s southern coast. It sits near the entrance to the Strait of Hormuz, one of the world’s most important oil shipping routes.

Why is Kharg Island so important for global oil markets?
Kharg Island handles around 90% of Iran’s crude oil exports. The terminal can load up to 7 million barrels of oil per day and store roughly 30 million barrels. Any disruption there can quickly affect global oil supply and oil prices.

What did the US attack on Kharg Island target?
The US strikes targeted military facilities, including runways, missile storage sites, and naval infrastructure on the island. Officials said oil export terminals and storage tanks were not directly hit.

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The EURJPY pair is affected by the stability at 184.40 barrier in the last period, which forces it to form new negative trading, approaching the initial negative target at 182.90 as appears in the above image.

 

Note that stochastic stability below 80 level might push the price to provide more negative trading, to attempt to target 182.45 level reaching %23.6 Fibonacci correction level near 182.00, while its rally again above 184.40 will confirm its move to the bullish track, to attempt to achieve several gains by its rally towards 184.80 and 185.45.

 

The expected trading range for today is between 182.00 and 183.65

 

Trend forecast: Fluctuated within the bearish trend

 

Copper price remains affected by the contradiction of the main indicators, which forces it to provide slow negative trading, to fluctuate near $5.7200, where gathering negative momentum makes us expect forming bearish waves, to attempt to reach the corrective stations at $5.6200, to press on the extra support near $5.5100, forming a key to detect the main trend in the upcoming trading.

 

While regaining the bullish trend requires forming strong bullish rally to settle above $5.9700 level, to begin targeting new positive stations by its rally towards $6.1200.

 

The expected trading range for today is between $5.6200 and $5.8200

 

Trend forecast: Bearish

Copper price remains affected by the contradiction of the main indicators, which forces it to provide slow negative trading, to fluctuate near $5.7200, where gathering negative momentum makes us expect forming bearish waves, to attempt to reach the corrective stations at $5.6200, to press on the extra support near $5.5100, forming a key to detect the main trend in the upcoming trading.

 

While regaining the bullish trend requires forming strong bullish rally to settle above $5.9700 level, to begin targeting new positive stations by its rally towards $6.1200.

 

The expected trading range for today is between $5.6200 and $5.8200

 

Trend forecast: Bearish