A striking divergence has opened up between the price of oil bought for immediate delivery and the price locked in for future deliveries, revealing the true scale of an energy supply crisis triggered by the US-Israel war on Iran and the effective closure of the Strait of Hormuz — the narrow waterway connecting the Persian Gulf to global shipping lanes that normally carries around one-fifth of the world's oil supply.
The main spot benchmark, known as Dated Brent — a basket of North Sea and US crude grades priced for shipment within the next 10 to 30 days — hit an all-time high of more than $144 a barrel last week, roughly $35 above the equivalent Brent futures price. Futures contracts are financial instruments that reflect expected oil prices for deliveries months or even years ahead, and are the figures most commonly reported in news headlines. On Sunday, front-month futures surged more than 8 percent past $103 a barrel after US President Donald Trump announced plans to impose a naval blockade on Iran. Despite the wide gap between the two benchmarks, analysts say the headline futures number still understates the severity of the immediate shortage.
The root cause is the near-paralysis of Strait of Hormuz traffic. Before the conflict, roughly 130 vessels transited the strait daily; by last Saturday that figure had fallen to just 17, according to maritime intelligence firm Windward. Market intelligence provider Kpler estimates the global economy is currently facing a daily shortfall of around 8 million barrels. Although Saudi Arabia and other producers have attempted to boost supply through alternative routes, those efforts have not bridged the gap. "The oil market is facing a physical supply deficit right now — so buyers are currently willing to pay a hefty premium for oil that is available right away," said Pavel Molchanov, investment strategist at financial services firm Raymond James & Associates.
Analysts point to a key reason why futures prices have not risen as sharply as spot prices: traders are betting that the crisis will eventually be resolved. Oxford University oil trading lecturer Adi Imsirovic noted that the so-called "TACO" factor — shorthand for "Trump Always Chickens Out," a reference to the US president's perceived tendency to reverse course on major policy threats — has made traders cautious about committing to high-priced long positions. Meanwhile, the failure of 21-hour US-Iran peace talks held in Pakistan has left a fragile two-week ceasefire in doubt, rattling financial markets globally, including Indian equities, where the Sensex fell sharply in early Monday trade.
The divergence between physical and paper oil prices matters because it signals that real-world supply constraints are more severe than the figures widely cited by governments and media suggest. Imsirovic warned that policymakers risk underestimating the shock: "They should be giving advice to citizens on how to ration energy, thus reducing unnecessary waste. Eventually, prices will have to do the work." Molchanov projected a two-to-three month recovery period once tanker traffic through the strait gradually resumes, with price stabilisation dependent on both improved security conditions and restored shipper confidence.