Why Renewed Iran Tensions Could Keep Fuel Prices Elevated

Key Points:

• Crude oil prices have fluctuated recently, dropping as supply fears eased but rising again due to renewed U.S.-Iran tensions, highlighting the market's sensitivity to geopolitical risks.
• Despite falling crude prices, refining margins for gasoline and diesel have surged to four-year highs because of tight product markets and bottlenecks in refining capacity.
• Middle Eastern refineries remain significantly disrupted from the Iran conflict, with exports of refined products less than half their pre-war levels, even as crude shipments partially recover.
• Ukrainian drone attacks on Russian refining infrastructure have further tightened diesel and gasoline supplies in Russia and neighboring regions, contributing to the product market strain.
• The International Energy Agency expects the supply-demand disconnect to ease as refineries restart and supply chains normalize, but this depends on stable tanker traffic through the Strait of Hormuz amid ongoing regional conflicts.