When the Strait of Hormuz was blocked in March 2026, analysts predicted a prolonged surge in physical crude prices. Three months later, the picture is the opposite: spot prices are lower than before the escalation. Bloomberg records this as one of the most unexpected outcomes of the first quarter of the Iranian crisis.
From record premiums to discounts in four years
Initially, everything developed according to plan. Caspian and Mediterranean crude surged: CPC Blend and Azeri BTC traded at a premium of $5–6 to Dated Brent, as European refineries rushed to find alternatives to Middle Eastern grades. But by early June, the situation reversed.
Last week, Kazakhstan failed to sell a batch of CPC Blend to China even at the maximum discount in four years. Azerbaijan's state oil company Socar sold a batch of Azeri Light at the lowest price in three months. According to Bloomberg, physical crude grades "deflated after record premiums as refineries restructured purchases in response to supply disruptions".
Why this happens when there is "less" oil
The paradox has a specific explanation: deficit and demand for a specific grade are different things. The Iranian crisis removed heavy Middle Eastern crude from the market, but most major refineries worldwide had already reoriented in advance — some toward American WTI, others toward African grades. Demand for Caspian crude, which seemed like a lifesaving alternative in March, cooled as quickly as it rose.
"Physical oil markets are confounding concerns about growing supply deficits caused by the Iranian war".
Bloomberg, June 10, 2026
A separate factor is China. The world's largest oil importer is cutting purchases of Caspian grades, choosing discounted Russian crude or its own strategic reserves instead. This is why the Kazakhstan shipment returned without a buyer even after maximum price concessions.
What this means for producers
- Kazakhstan and Azerbaijan fell into a trap: the March frenzy forced them to rely on premium prices, but refineries had already rewritten contracts.
- OPEC+ maintains quotas, but Caspian cartel members are effectively competing among themselves for a shrinking pool of buyers.
- European consumers are winning for now — spot prices are lower than a quarter ago, although retail fuel prices continue to rise due to logistics and taxes.
The physical oil market has shown that the reflex "crisis = price increase" works only in the first weeks of shock. After that, the market adapts — and those who failed to lock in contracts at the peak are selling at a discount.
The key question for the coming months: if the Hormuz blockade extends into autumn and Caspian infrastructure remains the only safe route for Europe — will premiums return, or has the market already found enough alternatives to keep Caspian producers in a weak position?
