Four Months into the Iran Conflict: Why Oil Hasn’t Reached $150

Four months into the conflict involving Iran, one of the biggest surprises in the energy market is what hasn't happened. Despite significant supply disruptions and ongoing geopolitical uncertainty, crude oil prices have remained well below the $150 to $200 per barrel levels many analysts predicted earlier this year. Headlines warned of supply disruptions, shipping constraints, and the possibility of a global energy crisis.

Four months later, the reality looks very different.

That disconnect between expectations and reality was one of the topics discussed on Mansfield's latest FUELSCast podcast, where Andy Milton, SVP of Supply & Distribution, and Dan Luther, VP of Sales, shared their perspectives on why global energy markets have proven more resilient than many expected.

The Market Has Adapted Faster Than Many Predicted

Historically, a major geopolitical conflict affecting a key oil-producing region would have triggered an extended rally in crude prices. Instead, markets have demonstrated an ability to adjust to supply disruptions more effectively than in previous crises.

"I think people underestimate how efficient the market is," Milton said during the discussion.

Part of that resilience stems from lessons learned during previous supply shocks. Global inventories entered this conflict at higher levels than during many past disruptions, giving refiners, traders, and governments more flexibility to manage supply shortages. At the same time, higher energy prices encouraged conservation and changes in consumption patterns across several regions.

The result has been a market that continues to find ways to balance supply and demand, even as significant volumes of crude have been removed from global trade flows.

Futures Prices Don't Tell the Whole Story

Although benchmark crude prices have remained relatively contained, physical fuel markets have experienced a very different reality.

In many regions, the cost of obtaining actual barrels of crude or refined products has significantly exceeded what futures prices alone would suggest. Transportation costs, regional supply constraints, and localized shortages have all contributed to higher physical market prices.

"You know, everyone was predicting, if you had said any other period in time in history this event would happen; they would say $150, $200 oil," Milton noted. "We got to what? $119, $120?"

While crude futures never reached those levels, fuel buyers still felt the impact.

"If you look at refined products in the U.S., diesel was over $200 a barrel," Luther said. "In California, it was well over 200."

That distinction is important for fuel buyers. The benchmark price of crude often receives the most attention, but regional supply conditions can have a much greater impact on the price customers actually pay.

Regional Markets Saw Different Outcomes

One of the more interesting developments during the conflict has been the variation between regional fuel markets.

California experienced some of the strongest pricing pressure due to its limited connectivity to other U.S. fuel markets and its reliance on imported supply. As Asian markets competed for available barrels, West Coast fuel supplies faced additional challenges.

Meanwhile, portions of the Midwest experienced periods of relatively low diesel prices as inland inventories remained ample ahead of seasonal agricultural demand.

These regional differences serve as a reminder that fuel markets are rarely impacted equally. Even during a global supply disruption, local infrastructure, refinery operations, inventory levels, and transportation networks can create vastly different pricing environments.

Markets Are Now Trading on Expectations

In recent weeks, crude prices have moved lower as markets began pricing in the possibility of a ceasefire and improving diplomatic conditions.

"The market's pricing more on the sentiment and the feeling that things are going to get done in the right way," Luther said.

That does not necessarily mean all risks have disappeared. Many of the long-term details surrounding regional agreements and future energy trade remain unresolved. However, traders appear increasingly focused on the potential for improved supply conditions rather than the disruptions that have dominated headlines for months.

"You can certainly see in the price action a de-risking of the market," Luther added.

Watch full "Episode 14 - 4 Months into the Iran War: Is Resolve Near?"

Stay prepared and stay informed. Subscribe to our FUELSCast podcast channel for ongoing updates as the market continues to evolve.

Click here to play the episode!