Energy Prices Update

 Global prices

From December through late February, all four benchmarks traded in a tight \$60–70 band, with Brent carrying its usual small premium over WTI and the Middle East grades clustered nearby. The Hormuz closure changed that almost instantly. Within days, prices spiked \$50–100 across the board – but the move was not uniform. WTI and Brent priced in a global supply shock; Oman and Dubai appear to have priced in that plus the direct disruption of their primary export route.

The more telling signal is in how each benchmark has retraced since the peak. WTI and Brent are showing a relatively low volatility around \$101 and \$106, consistent with markets that absorbed a shock and are recalibrating. Dubai has barely moved from its peak, sitting at \$129, suggesting the physical cargo market for Gulf sour crude may remain tight – or that term contract pricing is slow to adjust. Oman has corrected far more sharply, falling from around \$163 back to \$112. Two benchmarks referencing similar Middle Eastern sour crude streams, behaving quite differently.

A plausible explanation is structural. Oman trades as a physically deliverable futures contract on the Dubai Mercantile Exchange, giving it continuous price discovery and making it a natural vehicle for positioning and unwinding geopolitical risk premiums. Dubai is a Platts price assessment derived from a basket of grades, which tends to smooth price signals and more closely reflect negotiated physical cargo values. If so, the sharper retracement in Oman is consistent with a faster unwinding of a risk premium embedded in a traded benchmark, while Dubai lags.

The overall picture is consistent with a market that may have overshot on the way up and is now partially correcting in futures-linked benchmarks, while the physical market remains tighter than before the closure.

What the chart cannot show is how quickly this could reverse. The spike happened in under a week, from a range that had held for months. Current prices are a bet that the situation stays somewhat tense but contained – a bet that could be wrong by Tuesday morning. And each episode like this, even one that fully retraces on spot prices, tends to leave the underlying system slightly more expensive: shipping insurance gets repriced, supply contracts acquire new risk clauses, refiners build inventory buffers, governments revisit strategic reserve targets. The next disruption tends to start from a system that is already a little more fragile and a little quicker to panic than it was before.

The natural gas picture is structurally different from oil, and the Hormuz closure makes that difference visible. Henry Hub, the US benchmark, barely moved – sitting around \$3.00 throughout the episode. That is not indifference to a global supply shock; it reflects the fact that US gas pricing is dominated by a large, relatively insulated domestic market. What happens in the Strait of Hormuz therefore has only limited direct impact on Henry Hub.

TTF and JKM tell a different story. Both the European and Asian benchmarks were already elevated relative to Henry Hub before the closure – TTF around \$10–11, JKM slightly higher – reflecting tighter global LNG markets and the premium that seaborne gas commands over pipeline-connected supply. The Hormuz closure pushed both sharply higher, with TTF reaching around \$21 and JKM spiking to similar levels before settling at \$18.7 and \$20.5 respectively. The reason is geography: a significant share of global LNG supply originates from fields in and around the Gulf – Qatar being the most significant – whose export terminals sit behind the Strait. A closure does not just disrupt oil tankers; it constrains a major share of global LNG flows simultaneously.

The urea chart adds a downstream dimension that is easy to miss. Urea is synthesised from natural gas, making gas its dominant input cost, and its price had been trading in a relatively contained \$300–460 range through most of 2024 and into early 2026. Urea was already a volatile market before the closure – cycling between \$290 and \$495 over the preceding two years – which makes it harder to isolate the Hormuz contribution precisely. But the timing and scale of the most recent move leaves little doubt that the gas price shock was a primary driver, pushing urea from around \$450 to \$627 – a move of nearly 40% in weeks. Farmers buying urea now are effectively paying a Hormuz premium on their nitrogen, whether they know it or not. And unlike oil or gas, urea price spikes tend to feed through to food prices with a lag of one to two seasons – the disruption is planted first and harvested later.

Australian Prices

These charts show where the oil price shock lands for Australian households and businesses. Terminal gate prices – the wholesale price at which fuel leaves the terminal before retail margin is added – have moved sharply since the Hormuz closure, with petrol reaching 246 cents per litre and diesel hitting 310 cents. The diesel premium is notable: diesel sits in the middle distillate complex, which is typically tighter and more sensitive to supply disruptions than gasoline.

The short-term chart makes the timing unambiguous. Both prices were sitting quietly around 155–165 cents through December and into late February before the closure triggered a near-vertical move. Diesel responded faster and more sharply, consistent with tighter global distillate markets and the critical role of diesel in freight and industrial demand.

The long-term chart puts the current prices in context – and the context is sobering. In nominal terms, 246 cents for petrol and 310 cents for diesel are the highest on record, exceeding the 2022 post-Ukraine spike. But the real terms chart tells a more nuanced story. Adjusted for inflation, the 2008 diesel peak – driven by the same global commodity supercycle that briefly took oil above $140 – reached around 290 cents in today’s money, and diesel is now through that level. Petrol in real terms, at 246 cents, is approaching but not yet at its 2008 peak of around 255 cents. So the current episode is genuinely historic for diesel, and approaching historic territory for petrol.