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Russell: Crude oil futures are not in line with reality, as the Asia physical market collapses.
Crude oil futures prices'reflect a view of the market that it can successfully navigate through the Iran War, while the prices for physical cargoes or refined products signal an imminent crisis. One of these signals is not the case in the paper oil market. Brent crude futures for the global benchmark ended Wednesday at $91.98 per barrel, an increase of 4.8% over the previous close, but down from the brief spike that occurred on March 9, when they reached $119.50 - the highest price in almost four years. On the physical market, on Wednesday the premium of a physical cargo containing Middle East benchmark Dubai oil over its paper counterpart rose to nearly $38 per barrel, the highest level since Russia's invasion of Ukraine in 2022. The paper oil traders appear to be believing the rhetoric of U.S. president Donald Trump and certain members of his administration, that the campaign against Iran was going well and that there is no threat to oil and products shipments through Strait of Hormuz. The traders also seem to think that the International Energy Agency's record release of 400 million barrels from its stockpiles would help with some supply disruptions. The current problems cannot be resolved by political leaders' comments that are disconnected from reality. As long as the Strait of Hormuz is effectively blocked, the situation will only worsen and accelerate. It is particularly the case that Asia takes the majority of the 18 to 20 million barrels of crude oil and products per day (bpd), which flowed across the Strait before the U.S. launched an aerial campaign on Iran on February 28, 2008. System Breaking Prices for crude and refined products reflect the stress that is already being felt in Asia's supply chains. On Wednesday, the premium for a bar of cash Dubai crude compared to paper swaps rose $4.17, to $37.87, a new high not seen since Russia's invasion of Ukraine. This event also sparked fears of an oil shortage as Western buyers stopped purchasing Moscow's crude. The main difference between the Russian invasion in Ukraine and the conflict in Iran today is that there was not a real shortage of oil in 2022. Instead, the flow of Russian crude was redirected to China and India. The current situation, however, is very different. Even the rerouting of crude oil exports from the Gulf into the Red Sea port of Saudi Arabia and the United Arab Emirates' facility in the Gulf of Oman are not enough to compensate for the effects of the Strait of Hormuz closure. The problem in Asia is not only the crude supply, but also the tightness of refined products. This is quickly becoming a major issue for countries like Australia, Indonesia, and New Zealand that import oil. Some refineries in Asia have cut processing rates, and others, like China, are limiting fuel exports to meet domestic demand. The price of refined products is rising, and the cash difference for diesel is increasing. Singapore hit a new record high of 28.69 dollars a barrel Wednesday. This price reflects a 'premium over paper prices for physical cargoes. It has risen from 84 cents per barrel on February 27th, the day before the U.S. and Israel attack Iran. Jet kerosene is a similar case. Spot prices reached a record high on March 4 of $225.44 per barrel, before falling to $157.12 on the following Wednesday. This price is still 68% higher than $93.45 on February 27. The physical crude markets and product prices in Asia indicate that the supply chain has 'buckled' and will only get worse as more countries begin to hoard fuel and crude. You like this column? Open Interest (ROI) is your new essential source of global financial commentary. ROI provides data-driven, thought-provoking analysis on everything from soybeans to swap rates. The markets are changing faster than ever. ROI can help you keep up. Follow ROI on LinkedIn, X. These are the views of the columnist, an author for.
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South Korea will cap fuel prices starting Friday in order to ease consumer burden
South Korea announced on Thursday that it would cap the domestic fuel prices starting Friday in order to combat an increase in energy costs resulting from the conflict?in the Middle East. South Korea, Asia's fourth largest economy and a country that relies on imported energy for its needs, is making this move to try to mitigate the impact of the Middle East oil crisis. South Korea has set the maximum wholesale gasoline price at $1.17 per liter. This is below Wednesday's 1,833 won. The price will be adjusted every two weeks in order to reflect the changes in oil prices. The government will introduce a'maximum price' system for petroleum products in order to reduce the?burden to consumers, and to firmly resist attempts to use the crisis as an excuse to raise prices. Finance Minister Koo Yon-cheol stated that. The government stated that the maximum price will be determined by comparing pre-crisis supply prices with global oil prices and taxes. South Korea imports most of its energy. According to Korea International Trade Association data, it buys 70% of its oil from the Middle East and 20% of its LNG. According to the finance ministry, South Korea will also limit the stockpiling petroleum products. Refiners must?release at minimum 90% of the monthly volumes?of petroleum product they released in April and March a year ago. The government has said it will offer financial support to refiners who report losses due to the price cap.
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Aluminum nears four-year peak on Middle East supply concerns
Aluminum prices reached their highest level in almost four years on Thursday, as fears of a tighter supply for 'Europe and other areas' grew. The Middle East conflict is disrupting shipments through the Strait of Hormuz. The benchmark three-month aluminum on the London Metal Exchange increased 0.6% by 1111 GMT to $3,478.50 per metric ton after reaching $3,546.5. This was its highest level since late March 2022. The Middle East war has disrupted the deliveries of alumina and other raw materials to aluminium producers in the region. Norsk Hydro, a Norwegian company, announced on Thursday that its Qatalum aluminum smelter is in Qatar would stop the curtailment begun last week. Production will be maintained at 60% capacity with reduced gas supply. Hydro said it is working to minimize the effects of the curtailment. The rising price of oil is another concern for aluminum producers, as it can account for 40% to 45% in some areas of the cost to melt aluminium. International Energy Agency reported on Thursday that the war in the Middle East has caused the largest oil supply disruption ever. Alastair Muuro, senior base-metals strategist at broker Marex said that the current "short gamma" market profile contributed to the "scale of price movements in aluminium". This is a situation where option dealers sell during market declines, and buy during rallies. He added that "these option?shorts" are also contributing to the violent intraday swings. Copper fell 0.1% among other LME metals to $13,032 per ton. Munro stated that China, the world's largest metal consumer, "has not been active in the copper bid." Nickel added 0.1% and tin 0.8%. Zinc remained at $3,310.50. Lead rose by 0.4% to $2,943.50. Tin gained 0.8%, reaching $49,320. (Reporting and editing by Diti Pjara; Polina Devtt)
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After Gulf Shipping Attacks, oil prices and shares plummet
Attacks on oil tankers in the Gulf have shattered the prospects for an imminent deescalation of the Middle East conflict. Oil prices briefly rose above $100 per barrel, causing inflation fears to rise. The reaction shows 'how quickly bets placed on a quick end to the conflict, which gathered momentum earlier this week are being unraveled. The contradictory messages of U.S. president Donald Trump has left traders fearful that they will be caught off guard, causing them to stay away from the markets or find refuge in safe havens. Investors were not satisfied with the International Energy Agency’s announcement on Wednesday that it would release 400 million barrels from its oil reserves. This was the largest move of its kind in its history. Brent crude futures rose as high as 10.4%, to $101.59 per barrel, before retracing gains as concerns remained over whether the release of reserves would be enough to cushion the blow from the Middle East shock. U.S. Crude Futures traded last at $91,11, up 4.4%. "Even though the reserves may be large, it is not known how quickly they will?be delivered to the markets. Joel Hancock is an energy analyst with Natixis CIB. He said that a market balanced by strategic stock releases would be less efficient logistically. The STOXX 600 - the pan-European equity index – fell 0.4%. Futures for the S&P500 and the tech-heavy Nasdaq100 in the U.S. both fell by 0.5%. The MSCI All-World Index fell by 0.3%. The odds on Polymarket, a prediction market platform, indicated a?25% probability of a truce between the U.S.A. and Iran before March 31. This is down from 45% earlier in the week. Attacks on Oil Shipments Continue Iraqi officials reported that two fuel tanks were hit by Iranian boats laden with explosives in Iraqi waters early Thursday morning. An Iraqi official also told state media the oil ports had "completely stopped operations." Bloomberg News reported Oman had evacuated its main oil export terminal, Mina Al Fahal, as a precautionary move. Rodrigo Catril is a senior FX Strategist at NAB. He said, "The market continues to be very concerned about what's happening in the Strait of Hormuz and the information we have received over the past 24 hours does not make for a good read." It reemphasizes that we should be concerned about this. And the risk is that oil prices will go up from here, rather than come down. Iran increased its attacks against merchant ships in Strait of Hormuz. Since the start of the fighting, at least 16 ships have been hit in this region. Iran has warned that oil will soon be priced at $200 per barrel. Inflation Risks The?U.S. consumer price index rose 0.3% in February, according to data released on Wednesday. This is above the 0.2% increase that was forecasted for January. The consumer price index increased 0.3% in February, which was above the 0.2% rise seen in January. However, the report was not considered particularly relevant, given that inflation has been fueled by the Iran War. Globally, bond yields rose as the threat of rising inflation outweighed concerns about safe havens. On Thursday, yields on 10-year Treasury bills rose by 2.4 basis points at 4.2296% after a 7-bps jump overnight. Fed funds futures continued to fall as investors worried that higher inflation could make it difficult for the Federal Reserve ease policy. Markets bet that the Fed will only cut rates by one more time this year. The markets have speculated that the next rate increase from the European Central Bank may come as soon as June. Investors on edge sought out the dollar's liquidity, while shunning currencies of countries which are net energy consumers. This includes Japan and most of Europe. The euro fell 0.1% to $1.1558. The dollar gained 158.68 Japanese yen. (Reporting and editing by Stella Qiu, Niket Nishant, Edwina Gibbs and Shri Navaratnam; Susan Fenton, Keith Weir, Edwina Gibson and Keith Weir).
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Poland claims that the cyber attack on a nuclear centre foiled by Poland may have been from Iran
The government of Poland announced on Thursday that it had foiled a cyberattack against its nuclear research centre. It is now examining possible signs that Iran may be responsible. Poland claims it has been the victim of many cyberattacks ever since Russia invaded Ukraine on a large scale in 2022. Moscow has denied any involvement. Krzysztof GAWKOWSKI, Minister of Digital Affairs at TVN24+, said that the attack against Poland's National Center for Nuclear Research had taken place "in recent days". "The attack was not on a large scale, but it was an attempt at breaking through security that was stopped. Gawkowski added that "appropriate services" were already in place and the centre was safe. The first thing that he did was to identify the entry points, which he called "vectors". "The places where (the centre was attacked) are connected to Iran," he stated. When the final information is available and the services have checked it, we'll verify it. But there are many signs that it took place in Iran. The Iranian Embassy in Warsaw has not responded to an email request for comment. The centre conducts research in?nuclear power,?subatomic science and related fields. Poland does not have nuclear weapons, but is building its nuclear power plant. On February 28, the U.S., Israel and other countries launched coordinated airstrikes on Iran. The Supreme Leader of Iran was killed in these strikes: Ayatollah Khamenei. Tehran responded by striking?Israel and Gulf States?hosting U.S. Military installations, effectively stopping?oil-and-gas shipments through Strait of Hormuz – a conduit that carries roughly a 5th of the world’s LNG and petroleum.
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German economy recovery will only be slightly slowed by the Iran war, according to economists
Three institutes said on Thursday that Germany's economy will only slow a little this year, as long as the energy prices pushed up by?the Iran War?reduce in the months to come. According to its December forecast, the Ifo Institute expects an economic growth of 0.8% in this year. This is based on the assumption that oil prices and gas will only remain high in the short-term. It expects German economic growth to accelerate to 1.2% in next year. The biggest economy in Europe expanded for the first time in three year in 2025, increasing by 0.2% as consumer confidence improved. This was aided by an increase in government spending. RESTORATION AFTER SHOCK Timo Wollmershaeuser is Ifo's head of forecasts. He said that despite the energy price shock the recovery in Germany will likely continue this year. He cited increased government spending on infrastructure and carbon neutrality as stimulants for demand. Ifo predicted that the forecast for 2026 would have been 1.0% higher without the U.S./Israeli war against Iran. The institute stated that if gas and oil prices continue to rise, Germany's GDP will only grow by 0.6% in 2026, as the inflation rate is expected to reach a peak of just below 3%. This effect would continue into 2027 with a growth rate of only 0.8%. Short-term rise in commodity prices IfW institute has lowered their December 2026 forecast by 0.2%, to 0.8%. They assume that commodity prices are likely to remain high for only a few months. IfW has raised its growth forecast for the next year from 1.3% to 1.4%. The RWI Institute revised its forecasts for this year down by 0.1 percentage points, to 0.9%. It also lowered its outlook for 2027 by?0.2 percentage points, to 1.2%. Torsten Schmidt, RWI's forecasting chief, said that the Iran war "demonstrates how vulnerable Germany remains due to its energy dependence." All three institutions expect inflation to rise by at least 2.5% in this year, before it eases again in 2027. (Reporting and editing by Thomas Seythal, Susan Fenton, and Miranda Murray)
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Norsk Hydro announces Qatalum Aluminium Smelter will stop curtailment and operate at 60%
Norsk Hydro announced on Thursday that its 'Qatalum' aluminium smelter, located in Qatar, would halt the curtailment begun last week. Production will be maintained at around 60% of capacity with reduced natural gas supplies. Qatalum - which has an annual smelting capability of 648,000 tons - began a controlled shut down on March 3, after it was informed that the gas supply would be cut off. QatarEnergy, a state-owned company, announced the day before that it would halt?LNG output after Iranian drones attacked its facilities. Hydro released a statement saying that Qatalum had decided to stop further curtailment after receiving confirmation from its?gas supplier. The benchmark three-month aluminum on the London Metal Exchange jumped as much as 2,6% on Thursday to $3,546.50 per ton, its highest level in nearly four years. Middle East smelters - which supply around 9% of the global aluminium - are unable to ship due to the closure of Strait of Hormuz. Norwegian company Hydro?owns 50% of the Qatalum Joint Venture alongside Qatar Aluminum Manufacturing Co.?which is owned by QatarEnergy. "The curtailment was carried out in an?safe and controlled manner. This, along with the continued operation at around 60%, improves the conditions for a possible restart. Hydro has not revealed the exact date of when the restart will begin. Hydro is working hard to minimize the effects of the shipping disruptions and curtailment. "The safety of Qatalum's employees is our highest priority", it said. Reporting by Tom Daly Editing and proofreading by Tomasz Janowowski
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BMW prepares for another year of tariffs and China struggles
BMW warns that it will not see any relief from the ongoing tariff costs in China and intense competition. The company warned on Thursday about a modest decline in its pre-tax earnings in 2026 and a stagnation of deliveries. BMW's rivals Volkswagen, Mercedes and Audi also reported a weaker 2025 due to trade barriers and falling China sales. They also made mistakes with electrification as the market demand for electric vehicles diverged in key markets. The outbreak of war in the Middle East has roiled nerves, fueling supply chain concerns and driving up fuel prices. It also threatens?demand, which is a major market for premium brands like BMW and Rolls-Royce. Risks ahead in an "unstable" world BMW CEO Oliver Zipse stated that the company was sticking to its strategy of overhauling its model line-up and cutting costs. However, he warned about future uncertainty. "Our world remains unstable and many risks will continue in the current year," he stated after the 'company reported a 6.7% drop in '2025 pre-tax profits. At 0916 GMT, shares of the most valuable automaker in Germany were trading at 1.3% less. Walter Mertl, CFO of Washington, hopes that new trade agreements will be reached between Washington and its trading partners, including the European Union (EU), Mexico, and Canada, in the second half. The company expects that higher tariffs in 2026 will result in a?1.25 percentage point blow to its core automotive margin, which is expected to range between 4 and 6%. This is a 5.3% increase from?2025, and a 6.3% increase from 2024. BMW's presence in the United States, where its largest plant is located in Spartanburg in South Carolina, has helped to cushion the impact of U.S. Tariffs, but the EU also imposes tariffs on the fully electric Mini made in China. In 2025, the group's earnings before tax fell to 10.2 billion euro ($11.78 billion). This is expected to fall further by 5% to 9.9% in 2026. Delivery levels will remain at the same level as 2025. This is despite a 12.5% drop in sales on China's key market. In 2026 "China could achieve last year's levels," said?Mertl. The company sees potential for growth in the U.S., Europe and Asia. It is also ramping up its redesigned 'Neue Klassen' range of cars, with 40 planned launches this year and next.
UK gilts fall further as oil tankers burn and BoE rate hike betting rises
British government bond rates fell again in the early hours of Thursday's trading, continuing a dreadful performance for the entire month. This was due to news that two oil tankers had caught fire?in Iraqi water?on...Thursday following what appeared to have been Iranian strikes.
At 0823 GMT the five-year and 10-year gilt rates, which move in the opposite direction to the prices, had risen 4-5 basis points for the day, and were on course to close at their highest level since the start of the U.S./Israeli war against Iran.
Investors believe that Britain is more vulnerable to an energy price spike than other Western countries due?to the stretched public finances of Britain and its heavy dependence on imported gas.
The five-year rate, which is sensitive to changes in interest rates over the medium term, has risen 58 basis points in this month. This is the largest increase since September 2022, when the former prime minister Liz Truss unveiled her disastrous economic agenda.
Before her tenure, October 2003 marked the last time that 5-year yields increased by such a large amount.
Oil prices rose on Thursday, reaching $100 per barrel.
Interest rate futures were pricing in a 40% chance that the BoE would increase borrowing costs by a quarter point?in December. This was compared to Wednesday's expectations for no change.
Investor appetite for sales on the primary market remains strong despite the drop in gilt prices.
The next test for demand will be an auction of index-linked gilts due in 2049, which is due to take place on Thursday at 1000 GMT. Suban Abdulla, Suban Bruce and Andy Bruce report.
(source: Reuters)