Brent crude prices have jumped sharply as escalating geopolitical tensions inject fresh risk premium into oil markets, according to Societe Generale analysts Michael Haigh and Jeremy Sellem. The rally comes amid mounting US-Iran tensions, aggressive rhetoric from Trump, and ongoing threats to shipping from Houthi forces in key maritime corridors. These compounding risk factors are driving traders to price in potential supply disruptions across critical energy routes.
Meanwhile, crack spreads—the profit margin between crude oil and refined products—are showing exceptional strength in both Asian and US markets, outperforming the underlying crude rally. This indicates refined product markets remain significantly tighter than crude oil supply, reflecting strong downstream demand and potential refining constraints. The divergence suggests refiners are capturing wider margins as gasoline, diesel, and jet fuel command premium pricing relative to input costs.
FXnCO Insight
Traders should monitor crack spread momentum as a leading indicator for refined product inflation and potential upward pressure on consumer fuel prices ahead.
Source: FXStreet