Oil Market: Brent Above $95 Amid Military Premium
Oil prices are showing a sharp increase. Brent futures finished Tuesday up by more than 4.5% and continued climbing on Wednesday, trading in the $95–97 per barrel range; American WTI has settled above $90. The market is pricing in an escalating risk of supply disruptions from the region that accounts for about one-fifth of global maritime oil trade. Key drivers for prices include:
- Military Escalation: The US has carried out a series of strikes against targets in Iran, including attacks on two Iranian tankers; Tehran has retaliated with missile strikes on a US base in Jordan and launches towards the UAE.
- Threat to Kharg Island: Washington has openly considered strikes on Iran's main oil export hub, which would directly impact crude supply.
- Shipping Paralysis: Transit through the Strait of Hormuz, according to analysts, has declined to approximately 6 million barrels per day, compared to previous volumes that covered up to 20% of global supplies.
- Insurance Premium: Attacks on commercial tankers, including Saudi and South Korean vessels, have sharply increased freight and insurance costs in the Persian Gulf.
Analysts note that while support at around $90 per barrel holds, buyers remain in control of the market; however, with each wave of increases, the risk of sharp corrections in the event of de-escalation rises.
Geopolitics: The Strait of Hormuz as the Epicenter of Global Energy Risk
The conflict between the US and Iran has been ongoing for nearly six months, but the current phase appears most dangerous for the global FEC. Iran claims it has closed the Strait of Hormuz to commercial shipping, while Washington insists it controls the waters. Concurrently, the US is in consultations with Russia and China regarding sanctions pressure on Tehran. It is critically important for the global market that the strait not only facilitates oil from Saudi Arabia, Iraq, Kuwait, and the UAE but also Qatari LNG— a temporary loss of nearly 20% of global liquefied gas supply has already triggered a price shock in gas markets in Europe and Asia. Any scenario—from a blockade to strikes on Iran's export infrastructure—could add several dollars in risk premium to prices.
OPEC+: Conclusion of the Production Increase Cycle and Pause Until Year-End
Amid the geopolitical storm, the alliance of exporters adheres to its previously approved plan. Starting in September, seven key OPEC+ countries—Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman—have raised quotas by 188,000 barrels per day, completely exiting voluntary cuts totaling 1.65 million b/d. The total permitted production level has reached 36.2 million barrels per day. Further increases are on hold until the end of 2026; however, the baseline restrictions of approximately 2 million b/d, in place since 2022, remain. The next ministerial meeting is scheduled for September 6— the market will closely monitor whether the alliance will respond to the Middle Eastern premium and the falling volumes of Iranian exports. An additional intrigue remains the redistribution of quotas following the UAE's exit from OPEC and OPEC+ in May 2026.
Gas Market: Europe Lagging on Reserves, TTF Approaching $1000
The European gas market is experiencing its most intense start to autumn in recent years. October futures at the TTF hub are trading around $880–895 per thousand cubic meters, having increased about 2% since the beginning of the week— at the end of August, prices surpassed $800 for the first time in five months, and now the market is seriously discussing a move towards $1000. Causes of the price rally include:
- Significant volumes of LNG from Qatar and the UAE have been lost due to shipping restrictions through the Strait of Hormuz.
- Historically low levels of reserves in European underground gas storage facilities ahead of the heating season.
- Increased gas consumption by power plants during the summer due to heat and rising energy demand.
- Competition for spot LNG cargoes, only partially alleviated by reduced purchases from China and refusals from price-sensitive buyers like Pakistan.
LNG: American Exports as a Market Insurance
A balancing factor has been the new liquefaction capacities in North America: the Golden Pass and Plaquemines projects are ramping up production, while LNG exports from the US are holding near record levels. Nevertheless, the market has limited available volumes to operationally compensate for Middle Eastern losses, which maintains high price volatility in Europe and Asia.
Electric Power and Renewables: Renewable Generation Mitigates the Shock
The global electricity sector is adapting to the gas shortage. According to industry analysts, the ongoing addition of solar and wind capacities has been a key factor in diversifying energy supply and mitigating the impact of the gas shock: where the share of renewables is higher, the reliance on expensive imported fuels is felt less acutely. Concurrently, rising gas prices are prompting a reversal to coal in several Asian and European countries. A separate structural trend is the rapid increase in electricity demand from data centers and artificial intelligence infrastructure: in the US, energy systems are revising load forecasts, and access to grid capacity is becoming a scarce asset, enhancing the investment attractiveness of generation and grid companies.
Coal: Demand Supported by Expensive Gas
The coal market has once again benefited from the gas crisis. The switch of power plants from expensive gas to coal is being recorded both in Asia and in certain European countries, supporting the prices of thermal coal and the loading of exporters—Indonesia, Australia, Russia, and South Africa. China and India maintain high volumes of coal generation to cover peak loads, and in the short term, coal remains a backup resource for the global energy sector, despite long-term decarbonization goals.
Russian Oil Products Market: Export Restrictions and Selective Easing
Within the domestic framework of the Russian FEC, a strict regulatory regime continues to apply. The complete ban on gasoline exports has been extended to January 31, 2027, covering both producers and traders. However, from September 1, the restrictions for diesel fuel, marine fuel, and gas oils have been eased—their export is once again permitted for direct producers, reducing the risk of overstocking at refineries and decreasing processing volumes. These measures are complemented by:
- Elevated standards for exchange fuel sales to ensure the domestic market;
- Supervision by the Federal Antimonopoly Service over speculative reselling of oil products;
- A damping mechanism to compensate oil producers for part of the lost export revenues.
Fuel reserves in the country are comparable to last year, and the situation in regions that experienced disruptions in spring is gradually normalizing—however, the autumn refinery maintenance season requires regulators to remain vigilant.
What This Means for Investors: Key Indicators for September 3
The FEC market enters Thursday with the highest geopolitical premium seen in months. Investors and market participants should monitor:
- The Dynamics of the US-Iran Conflict — any signals regarding strikes on Kharg Island or, conversely, negotiations could shift Brent by several dollars in either direction.
- Shipping Through the Strait of Hormuz — the restoration of transit would be the main deflationary factor for oil and LNG.
- The OPEC+ Meeting on September 6 — the alliance's response to falling volumes and the price rally.
- The Rate of Filling European Underground Gas Storage — determining whether gas will remain above $900 per thousand cubic meters.
- The Russian Fuel Market — effects from the partial reopening of diesel exports and exchange prices for gasoline.
The baseline scenario for the coming days is high volatility with elevated prices for oil and gas: the energy market is once again trading on geopolitical factors rather than balancing supply and demand.
