Brent Near $118 as Markets Brace for US-Iran Clash and Volatile Week

ICE Brent is trading around $118 per barrel, set for a 13-14% month-on-month gain, with traders bracing for what analysts at Oilprice.com call "extremely volatile trading sessions" ahead of the US midterm elections. Every signal points toward a resumption of US-Iran hostilities within weeks, despite Qatari and Pakistani mediation. Rising Hormuz attacks, reported explosions at Iran's Jask port, military repositioning and extremely bullish CTA positioning (commodity trading advisor funds that follow price trends) all point one direction. Note what's missing: no verified confirmation of the Jask blasts. Reported is not confirmed, and traders are pricing the worst case anyway.

What happened in the Strait of Hormuz?

Iran's IRGC (Islamic Revolutionary Guard Corps) said three unidentified vessels struck naval mines, caught fire and were abandoned. Tehran claims the ships used an "unauthorised" route and ignored warnings. US Central Command disputes claims that the strait's main shipping lane has been mined. Two governments, two versions, zero independent verification. That gap is itself the story, because insurance rates and freight follow perception as much as fact.

Who is cashing in?

ExxonMobil and Chevron both beat Q3 analyst expectations, earning $15.4 billion and $9.9 billion respectively. Exxon earned more from downstream (refining and marketing) than upstream (production) for the first time in six years. War has turned refining into Big Oil's profit engine — a phrase worth stress-testing, since windfall margins tend to invite political attention, and attention tends to invite taxes.

Valero Energy, also riding record margins, agreed to buy LyondellBasell's idled Houston refinery for $320 million. It plans to restart the 165,000 b/d distillation column by end-2027. Notably, Valero still refuses to restart its 145,000 b/d Benicia plant in California. The message: capital flows to the Gulf Coast, not to Sacramento's regulatory environment.

How are governments responding?

• Europe: EU governments will release 42 million barrels of strategic oil and product reserves over three months, half of it diesel. France expects pump prices to fall €0.12-0.18 per litre ($0.51-0.76 per gallon) within days after its 10-million-barrel release. Caveat: strategic reserves are finite; a three-month release covers symptoms, not the Hormuz risk premium.
• Saudi Arabia: Aramco is reportedly offering discounted spot cargoes for October and November arrival to European buyers, maximizing Red Sea loadings to avoid Houthi attacks.
• UAE: ADNOC told clients its second 1.5 million b/d pipeline to Fujairah, bypassing Hormuz entirely, will see first deliveries in early 2027. Offshore grade transits will drop to a bare minimum — once the line actually starts up.
• Russia: Moscow plans to extend diesel export restrictions through January while granting separate quotas for US-bound cargoes. November shipments could reach 2.15 million tonnes, potentially 3.5 million tonnes by year-end.

What is breaking downstream?

Phillips 66 declared force majeure on butane loadings from its 260,000 b/d Freeport LPG terminal after a power outage and compressor failure. The risk compounds as US facilities run at high rates chasing strong export demand.

Egypt's EGPC bought six fuel oil cargoes for November-December delivery. Cairo budgeted LNG imports at $10.1 (per unit, per the source) for financial year 2026/2027 and has already spent 60% of that sum. Fuel oil substitution is a workaround, not a fix.

How deep is the gas crisis?

TTF (the Dutch Title Transfer Facility, Europe's gas benchmark) soared past €100 per MWh ($34 per MMBtu), heading for a 42% monthly gain. European storage sits at just 75% full, yet sites have already started net withdrawals. Iran risk adds a further bid. Japan, meanwhile, is set to reclaim the LNG import crown from China — 62 million tonnes against China's expected 61 million tonnes — as mild winter forecasts, near-full Chinese storage and high prices suppress Chinese demand.

Where else is supply at risk?

Libya's NOC reported another armed-group incident: a shut valve on the Hamada-Zawiya pipeline halted flows to the 120,000 b/d Zawiya refinery, the country's largest. In Chile, Q3 copper output slumped 12% year-on-year to 1.16 million tonnes, the lowest in at least two decades, on mining accidents, weather, operational problems and falling ore grades. And in Asia, the east-west fuel oil spread hit records as freight surged: the November 380-cst high-sulphur spread reached $155 per tonne, with low-sulphur topping $200 per tonne.

China's aluminium producers, squeezed by Beijing's 45-million-tonne domestic capacity cap, are expanding smelting abroad across Asia and Africa, with at least 15 mtpa of new capacity planned or announced. Energy-intensive industry follows cheap power, and cheap power is increasingly an emerging-market export.

The takeaway: watch whether Centcom's version or Tehran's holds on Hormuz mining, whether France's pump-price relief materializes within days as promised, and whether Brent's approach of $120 forces SPR decisions beyond Europe's 42 million barrels.