By Joe Wallace
For a glimpse of how much higher energy prices could still soar, look beyond the prices Wall Street analysts normally track for West Texas Intermediate in the U.S. and Brent in Europe.
At the center of the supply squeeze in the Middle East, traders are paying an eye-watering $160 a barrel for the Emirati oil that can dodge the Strait of Hormuz, far above those global benchmarks.
Those sky-high prices, traders say, are a harbinger of where the rest of the market could be heading if the Persian Gulf isn't reopened soon. That is because Asian customers are scouring the world for similar varieties of crude to keep churning out diesel and jet fuel.
Benchmark oil prices sank after President Trump postponed strikes on Iranian energy infrastructure and said the U.S. had held "productive" talks with Tehran, raising the prospect he might be searching for a way to end the war.
But traders warn that the talk might be another false start toward peace. They also worry that Iran must agree to an end of hostilities before oil tankers can sail freely through the strait. Unless peace talks pan out fast, record high prices for specific grades of Middle Eastern crude cargoes will soon cascade to the U.S. and elsewhere
"The disruption is so massive, we will turn into full panic mode if this situation is not resolved rather quickly," said Helge Andre Martinsen, an energy analyst at Norwegian investment bank DNB Carnegie.
A resolution means oil flowing through the strait again. Even then, for prices to fall toward prewar levels, traders want to see Persian Gulf producers reverse output cuts from the early days of the war. It would also require long-term sanctions relief on Iran and Russia, Martinsen said. The U.S. has relaxed sanctions on both to soothe markets but only for a month.
Oil prices appear to move on every headline about the war, but in fact, it can take weeks or months for them to ripple through the complex logistical and financial system connecting wellheads to gas station pumps.
The most yawning gap in prices is between oil that used to flow out of the Gulf and different kinds of crude from farther afield. Prices for a grade of crude known as Dubai had risen well over 150% so far in 2026 by Monday's close, according to commodities data provider OPIS, which shares a parent company with The Wall Street Journal. That is far more than the standard benchmarks cited in the media.
Brent futures prices have been leisurely by contrast, rising 64% for the year through Monday.
There are other large distortions. Brent crude, the global benchmark reflecting prices for oil pumped in Europe, trades at a historically wide $12 per barrel premium over the WTI American benchmark, traded in Cushing, Okla.
The difference, traders say, can be chalked up to WTI's location, far from where the oil is needed in Asia. Its lower price also reflects the higher shipping costs required to get it to Asian buyers , as well as angst that the U.S. might restrict crude exports to husband energy resources at home.
Asian refiners are hunting for sulfur-rich oil to replace the Middle Eastern grades that are getting prohibitively expensive, driving up prices for oil from Norway, Russia, Colombia and even some crude from the U.S. Cargoes are diverting from Europe to Asia, where the shock from the Persian Gulf is most acute and traders can earn a premium.
Brent itself has much less sulfur than Dubai oil. And widely tracked Brent futures contracts are for crude that will be delivered in May, when many traders think the war might be over. Some also say futures have become a poor guide to conditions in the physical oil market because banks, commodity traders and hedge funds have reined in activity to avoid big losses, creating a vicious cycle of thin trading and huge spikes and slumps.
Markets in the Gulf have been so chaotic that prices for Dubai, the oil, don't even include crude from Dubai, the emirate, right now. It can't get out of the strait, so price-tracking firms removed the grade from their calculations.
Instead, the prices reflect deals for oil from Oman -- just outside Hormuz -- and a dribble of crude from Abu Dhabi that gets piped to the port of Fujairah, also beyond the strait's narrowest stretch.
The trading arm of French oil producer TotalEnergies has been particularly active, buying dozens of cargoes, said people who have tracked the sales on a platform run by S&P Global. How much of the oil Total has agreed to sell onward couldn't be learned, but the massive position may amount to a bet that Asian refiners will pay top dollar for scarce supplies.
A spokesman for Total, which had stopped producing oil and gas at various sites inside the Gulf, didn't respond to a request for comment.
The scramble for oil from the Gulf is starting to seep into broader international oil markets. Prices for oil from the Johan Sverdrup field off the coast of Norway have jumped to record premiums over Brent. Other sulfur-heavy crudes -- "sour" in industry jargon -- have also rocketed in price, including oil from northern Alaska, Argus data show.
Sucking all the oil available to Asia is one way in which the global market solves the immediate problem, but it also spreads the pain around the world.
"You've seen Asia absolutely fighting for every barrel there is in the world," said Amrita Sen, founder of consulting firm Energy Aspects. She said Brent prices will eventually catch up with the Middle Eastern crudes changing hands at over $150 a barrel if Hormuz stays shut. WTI, far from the action and lacking sulfur, can keep trading at huge discounts, Sen added.
Before the war, almost a fifth of global oil supplies sailed through the strait each day, roughly 15 million barrels of crude and five million barrels of refined fuels. Workarounds have freed some to flow on alternative routes, including a Saudi pipeline to the Red Sea.
As of Monday, the closure had sheared 16 million barrels from daily oil supplies, according to JPMorgan Chase analysts. That shortfall could shrink next month with more oil flowing through the pipe and releases from strategic stockpiles in the U.S. and its allies. The world economy would still be short 10 million barrels of oil daily.
Write to Joe Wallace at joe.wallace@wsj.com
(END) Dow Jones Newswires
March 24, 2026 21:00 ET (01:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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