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The United States’ (US) war with Iran has spiked oil prices and injected a lot of uncertainty into markets. One of the biggest impacts for consumers is the increased cost of fuel and its knock-on effects to the broader economy. However, to understand what is happening when it comes to the increased cost of fuel, we need to understand what drives pricing along the fuel value chain.
The number that appears on a petrol station’s price board is the end of a long sequence of factors. It is not a live reading of the market. Understanding the difference between what oil costs on paper and what it costs to actually put a barrel on a ship, and get it into a refinery is the difference between reading a headline and understanding the process. Right now, the market price of oil and the petrol price are further apart than they have been in some time.
The Brent Crude benchmark
The start of the petrol value chain is Brent crude, which is a worldwide benchmark price for purchasing oil. It is the price the market agrees on for a standardised, forward-dated contract based on North Sea oil. The price is denominated in barrels which is a measure of 159 litres (42 US gallons or 35 imperial gallons) of oil. What physical cargoes actually trade at – the real volumes changing hands between producers, traders, and refiners – is a different price to the Brent price. In stable conditions, the gap between the benchmark and the physical price is small and predictable. When supply routes are disrupted, however, the physical market moves faster and further away from the benchmark because buyers who need actual oil now are bidding against each other for cargoes that tangibly exist and can be moved. The benchmark does catch up, but with a lag. This means that when you watch the Brent price on a screen during a supply disruption, you are watching yesterday’s agreed price. In actual fact, the traders selling physical barrels of crude are already paying more.
Global dependence on Gulf fuel
Most countries do not produce meaningful quantities of crude oil domestically, and domestic refining capacity has contracted materially over the years. As such, countries have become progressively more dependent on imported refined products rather than crude being processed locally. Before the Hormuz disruption, the bulk of diesel, petrol, and jet fuel arrived from Gulf producers – Oman, Saudi Arabia, and the United Arab Emirates being the primary sources. That supply line is now under pressure, and the market has had to adapt in real time.
The world’s new oil supplier
The adaptation is visible in the shipping data, with countries receiving significantly more fuel from the US in recent weeks, with American cargoes partially filling the gap left by constrained Gulf flows. This is not a like-for-like pricing substitution. US Gulf Coast refined products can have travelled considerably further than a cargo loading out of the Arabian Gulf under normal conditions, and distance translates directly into freight cost. That freight cost sits on top of a flat price that is itself elevated. The landed cost of a barrel of fuel reflects both the market price of the commodity and the substantially higher cost of getting it here from a different origin – a compounding effect that the regulated petrol price formula does not always capture cleanly or quickly. At the start of April countries have been recording their largest petrol price increases in close to two decades, and the repricing of freight and supply origin has yet to fully work its way through the system.
Where the damage is done
What makes supply disruptions even more damaging is the downstream trading behaviour. When buyers believe supply is about to tighten, they order ahead of immediate need, with wholesalers building inventories and logistics operators filling storage. While each of these decisions is rational in isolation, collectively, they amplify the apparent tightness in the market and drive prices harder than the physical reality justifies. On the back of the war, the major oil trading houses are all guilty on this point. Even if the conflict concluded and a ceasefire took hold tomorrow; the rewiring of global oil trade flows would take months to normalise. Unfortunately, supply chains do not snap back, and the market has been warned not to expect a quick return to pre-war patterns, and that Hormuz flows may, in fact, not recover to their previous volumes regardless of how the political situation resolves.
Delayed pain for the consumer
The last part of the picture is the one that gets the least attention. Even if alternative supply were fully secured today, the effect on pump prices would still take weeks to arrive. A tanker from the US Gulf Coast can cover a substantially longer route than one from the Arabian Gulf – transit time alone runs to several weeks. Once a cargo arrives, it must be offloaded, processed through the terminal infrastructure, and distributed through an inland logistics network before it reaches a vehicle. The supply chain between a barrel leaving a loading port and that same barrel entering a tank is measured in weeks, not days. The market prices in what it expects future supply to look like, but consumers experience what supply looked like in the past. So, even if the oil price goes down, consumer pricing will linger higher – long after the disruption is over.
MARKET MOVES
Bonds
The US 10-year Treasury yield is anchored near 4.3%, unmoved since mid-month. With tensions in Iran having escalated again, as President Trump ordered the US Navy to target mine-laying vessels in Hormuz, the US blockade of Iranian ports holds, and oil remaining well above pre-conflict levels, the Fed is expected to hold rates steady next week. Markets are only pricing in a 26% chance of a December cut, down sharply from two cuts expected before the war.
German bund yields are at 3.05%, their highest level since 2011, as Germany’s private sector contracted at its steepest pace since late 2024, the Economics Ministry halved Germany’s 2026 growth forecast, and Brent is well-above $100/barrel, all leaving the ECB with no easy options. In addition, Tehran has ruled out immediate talks, and the truce extension has provided little relief.
United Kingdom (UK) gilts are above 4.95% for the first time since 2008. The UK Purchasing Managers’ Index (PMI) showed an April bounce but much of it reflects precautionary stockpiling. The March budget deficit at £12.6 billion came in above the £10.4 billion forecast, adding complexity for the Bank of England’s Monetary Policy Committee (MPC) ahead of its 30 April meeting.
Equities
Nasdaq futures are up 0.6% this morning on the 25% increase in Intel’s pre-market opening price following a strong first quarter financial result, amplified by Tesla CEO Elon Musk signalling Tesla could direct around $3 billion towards Intel’s chip fabrication. Thursday’s session was weaker, with the Dow, S&P 500, and Nasdaq falling 0.36%, 0.41%, and 0.89% respectively, as stalled Iran talks and broad sector weakness drove the selling.
The UK’s FTSE 100 fell for a fourth straight session on Thursday, with Hormuz tensions and the war’s stalled diplomacy efforts keeping sentiment fragile. Grocery retailer Sainsbury’s dropped 3.7% on conflict-related margin warnings, while information and analytics company RELX shed over 2% despite holding its outlook. Ex-dividend moves in miner Fresnillo, defence company BAE Systems, and financial services group Legal & General added to the drag. The London Stock Exchange, however, was up on strong first quarter trading volumes.
Europe’s STOXX 50 slipped 0.3% to 5,887, its fourth consecutive lower close, while the STOXX 600 edged up to 615. Eurozone PMI confirmed private sector contraction under higher energy costs. The financial services industry felt the pinch, with Santander, Deutsche Bank, and BBVA each losing over 2%, software services company SAP dropped more than 6% pre-earnings, while cosmetics company L’Oréal jumped 9% on its best quarterly growth in two years.
Commodities
Brent is above $106/barrel this morning, tracking a weekly gain of close to 18%. President Trump’s orders for the US Navy to target mine-laying vessels and the boarding of an Iranian supertanker in the Indian Ocean have made a near-term resolution look remote. The ceasefire extension is holding in name only, and sharply reduced Middle Eastern shipments are tightening global supply in a way that increasingly looks structural.
Gold is below $4,700 and on track for a 3% weekly loss, with its reversal being driven by the same forces pushing crude higher. Elevated energy prices have revived US inflation expectations and rate hike bets, rotating safe-haven demand back into the dollar and away from bullion. With no meaningful talks scheduled, and both sides maintaining Hormuz blockades, the near-term picture remains challenging for the metal.
Currencies
The US Dollar Index is around 98.8, on course for its first weekly gain in three weeks. Stalled diplomacy, President Trump’s hardening posture on Hormuz, and energy-driven inflation expectations have all supported safe-haven demand. Markets are pricing in a hold in interest rates by the Fed next week and likely beyond. Fed-Chair-nominee Kevin Warsh’s pledge to uphold policy independence is the week’s other notable dollar-relevant headline.
The euro has slipped below $1.17/€ for the first time in two weeks. Eurozone PMI confirmed the fastest private sector contraction since late 2024, Germany has slashed its growth outlook, and Brent crude sitting well-above $100/barrel has left the ECB’s policy calculus deeply uncomfortable. With Tehran refusing to engage, there is no near-term catalyst for energy relief.
Sterling is holding around $1.35/£, its weakest level since 10 April. UK PMI beat expectations, but the detail was less encouraging, with much of the activity driven by inventory building ahead of anticipated supply disruptions. The pound remains sensitive to any shift in the Iran narrative heading into the weekend.
*Please note that all information is at the time of writing.
*We will not be publishing the Citadel Weekly Market Wrap on 1 May 2026 as it is the Workers’ Day public holiday. We will resume its publication on Friday 8 May 2026.
Key indicators:
GBP/USD: 1.3464
GBP/EUR: 1.1516
GBP/ZAR: 22.39
BRENT CRUDE: $106.85
GOLD: $4,693.49
Sources: Astron Energy, Bloomberg, DMRE, EIA, FIASA, News24 Business, Reuters, TotalEnergies, Trading Economics, Vivo Energy and Vopak.
Written by Citadel Advisory Partner and Citadel Global Managing Director, Bianca Botes.
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