The risk of escalating tensions in the Middle East stimulates a further rise in crude oil prices, and the expectation of domestic refined oil price hikes is heating up.

Ask AI · How the Middle East escalation triggers a surge in crude oil prices?

On April 2 local time, international crude oil prices surged again significantly. By the close of that day, the NYMEX May light crude oil futures settled at $111.54 per barrel, up 11.41%; the June delivery London Brent crude futures settled at $109.03 per barrel, up 7.78%.

As one of the most important spot crude oil price indicators globally, the spot Brent crude oil price broke through the $140 per barrel mark on the same day, reaching $141.37 per barrel, the highest level since 2008.

Geopolitical risks remain the core driver of large fluctuations in the crude oil market

According to Xinhua News Agency, U.S. President Trump claimed on social media on the evening of April 2 that the U.S. military will next target Iran’s bridges and power plants. Previously, Trump had repeatedly threatened to destroy Iran’s power plants and other facilities. Iranian Foreign Minister Araghchi responded that damaging civilian infrastructure would not force Iran to surrender.

Trump’s statement once again sparked market concerns over escalating tensions in the Middle East and pushed up oil prices, potentially prolonging the disruption of energy supplies through the Strait of Hormuz. The transportation through the Strait of Hormuz remains interrupted, and more Middle Eastern oil-producing countries are passively reducing output, keeping the global oil supply tight.

Recently, IEA Director Fatih Birol said that oil supply shortages will intensify in April. Currently, the global oil supply loss totals about 12 million barrels per day, compared to about 5 million barrels per day during the 1970s energy crisis. IEA member countries agreed in March to release 400 million barrels of strategic petroleum reserves, but this does not fundamentally solve the problem. The key to resolving energy supply shortages is to keep the Strait of Hormuz open.

Zhao Ruichen, senior researcher at Galaxy Futures, told Beijing News Shell Finance that geopolitical risks remain the main driving force behind the recent large fluctuations in the oil market. Since March, the Strait of Hormuz has been effectively interrupted, providing a solid bottom for prices, but sudden news that could escalate or ease the situation can cause significant volatility. Recently, oil prices sharply dropped on signals of easing tensions in the Middle East, then rebounded sharply after Trump’s tough speech. This is a typical case of geopolitics dominating the market: Trump’s tough stance reversed expectations of a quick end to the conflict, sharply increasing risk aversion and pushing up oil prices. International oil prices are highly volatile, and in the short term, oil prices will continue to fluctuate around developments in the Middle East.

Domestic refined oil retail price increase expectations heat up

Affected by the ongoing Middle East geopolitical conflicts and high volatility in international crude oil prices, since March 24, during this round of refined oil pricing cycle, crude oil change rates have turned positive after fluctuations, and the expectation of domestic retail price increases has become clearer.

At 24:00 on April 7, the domestic refined oil pricing window will open again. According to the domestic refined oil pricing mechanism, this will be the sixth increase this year. So far this year, domestic refined oil prices have undergone six adjustments, with five increases, zero decreases, and one pause.

Liu Bingjuan, analyst at Longzhong Information, pointed out that as of April 2, the average reference crude oil price in this cycle was $109.06 per barrel, up 2.24% from the previous cycle. It is expected that when the pricing window opens, the theoretical increase in refined oil prices will be around 130 yuan per ton, and this round of adjustment is very likely to be an increase.

Liu Bingjuan noted that from the supply side, there are still no signs of substantial easing in Middle Eastern conflicts. The Strait of Hormuz remains blocked, and oil-producing countries like Saudi Arabia in the Persian Gulf have been forced to significantly cut production, supporting oil prices. From the demand side, global demand remains sluggish and is slowly improving, with crude oil consumption decreasing.

Jinlianchuang analyst Xu Peng said that in the short term, the positive change rate of crude oil may continue to expand, and the trend of domestic refined oil price increases is basically certain. According to estimates, as of April 2, the average price of reference crude oil varieties was $103.94 per barrel, with a change rate of 1.81%, and domestic gasoline and diesel retail prices are expected to increase by 160 yuan per ton.

However, to ease the impact of recent abnormal international oil price rises on China, on March 23, based on maintaining the current price mechanism framework, the government took temporary regulatory measures on refined oil prices.

The National Development and Reform Commission stated in a press release that since the domestic refined oil price adjustment on March 9, driven by the intensifying US-Israel-Iran conflict, international crude oil prices have surged sharply, especially with Middle Eastern crude reaching record highs. To mitigate the impact of abnormal international oil price increases, reduce downstream user burdens, and ensure stable economic operation and social livelihood, temporary regulatory measures were adopted on domestic refined oil prices within the current price mechanism framework.

According to the current pricing mechanism, on March 23, the domestic gasoline and diesel prices (standard products) should have increased by 2,205 yuan and 2,120 yuan per ton, respectively. After adjustment, the actual increases were 1,160 yuan and 1,115 yuan.

Beijing News Shell Finance reporter Zhang Xiaochong

Editor Yue Caizhou

Proofreader Lu Qian