The oil sector is preparing for an extended conflict between the United States and Iran in the Persian Gulf, with limited prospects for rapid resolution, according to discussions at this year’s Asia Pacific Petroleum Conference. Industry participants, including producers, traders, and refiners, expect elevated prices to persist throughout the duration of hostilities as Middle Eastern oil flows face continued disruption.
Analysts note that the conflict represents a situation where neither the U.S. administration nor Iranian leadership appears willing to accept less than decisive victory, making negotiations unlikely in the near term. Some industry delegates have suggested that a political settlement would require regime change in either Washington or Tehran, with observers noting that potential changes in the upcoming midterms would not necessarily alter the course of events. As a result, the conflict is expected to extend well into the following year and potentially beyond.
Pricing pressures have intensified across multiple dimensions. Brent crude has risen above $100 per barrel, while physical delivery costs have climbed substantially higher than futures prices. Tanker rates for vessels shipping crude from the Middle East to China have reached record levels near $800,000 daily, up from historical norms. Freight charges from the Persian Gulf to North Asia have surged to $30 per barrel, compared to $6 before the conflict began, while insurance premiums have increased from $0.05 to $2.50 per barrel.
The strain on global refining capacity has emerged as an additional concern for the industry. Refineries worldwide have operated at elevated rates to compensate for lost production from the Middle East and Russia, but available capacity remains insufficient to fully offset production losses. Fuel supplies face particular pressure, with executives warning that a prolonged closure of the Strait of Hormuz would intensify shortages further.
Traders have increasingly shifted focus from futures market prices to physical market dynamics, where supply constraints and elevated shipping costs have driven actual prices significantly higher. Premium blends sourced outside the Persian Gulf, such as Russian ESPO crude, have commanded substantial price premiums as buyers seek alternatives to higher-cost Gulf supplies.
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