Brent premium hits a four-year high as the Strait of Hormuz stalls, triggering supply chaos

Golden Ten Data reported on March 3 that, due to the surge in global crude oil benchmark prices following the US and Israel's attack on Iran, the premium of Brent crude oil futures over Middle Eastern Dubai crude oil has risen to its highest level since 2022. According to brokers and traders, on Tuesday, the futures-to-swap price spread (EFS), which measures the price difference between the two, exceeded $6 per barrel. For most of last week before the conflict erupted, this spread was less than $2. Despite the sharp plunge in Brent crude oil prices, the Dubai benchmark price in over-the-counter trading remains elusive. Shipping through the Strait of Hormuz has come to a standstill, causing a disruption in crude oil outflows from the region, and the high uncertainty of supply has led to a significant contraction in trading activity in the Middle East. Another factor driving up prices is soaring freight rates—idle tonnage capable of transporting crude oil produced by regional suppliers in this resource-rich waterway is becoming increasingly scarce. JPMorgan analysts Natasha Kaneva and others warned in a report: "With the Strait of Hormuz still paralyzed, time is ticking away: if the strait cannot be reopened within 21 to 25 days, upstream production may be forced to shut down."