Asian refiners have begun pricing their orders for U.S. crude at the ICE Brent benchmark instead of the usual Dubai crude price, as the Middle East benchmark fluctuates wildly due to limited physical supplies from the Persian Gulf.
Dubai crude oil prices rose to a record high of $169.75 per barrel last week and were at about $130 per barrel.
These highly volatile prices and supply uncertainty from the Middle East have prompted refiners in Asia to price their products against Brent, rather than the Dubai benchmark that traditionally prices imports in the world’s largest crude oil import region.
A number of Japanese refiners have already purchased U.S. crude cargoes for delivery in July, priced at ICE Brent, sources at trading and refining companies told Reuters. Taiyo Oil, for example, bought 2 million barrels of U.S. light crude through a tender at a $19 per barrel premium to ICE Brent for delivery in July, according to Reuters sources. Taiyo Oil usually buys U.S. West Texas Intermediate crude, priced at the Dubai benchmark.
The major shift in Asian pricing shows the market’s unwillingness to trade Dubai prices. These prices have been seriously distorted in recent weeks by the major physical supply disruptions with the de facto closure of the Strait of Hormuz.
Asian refiners are also being forced to pay huge premiums for non-Middle Eastern crude, especially for the sour grade, suitable for Asian refineries focused on processing sulfur-rich, Persian Gulf crude. The most suitable grade from Norway, Johan Sverdrup, was offered last week at record high double digits over Dated Brent.
Refineries in Asia are also reducing processing rates because of a crude oil shortage. As a result, fuel prices continue to rise and governments are introducing fuel-saving measures such as four-day work weeks, working from home and extended national holidays. Many Asian countries are also banning fuel exports. This is affecting global fuel supplies, especially in the jet and diesel markets.
Crude oil
Saudi bypasses Hormuz as oil exports from Yanbu rise toward target of 5 million
Recently, fears that the blockade of the Strait of Hormuz would mean a permanent collapse of oil supplies (we have since seen Iran allow “friendly” ships to cross the strait, especially if they toll the toll keeper $2 million per crossing) peaked and drove the price of Brent up to $120.
As Iran blocked Saudi ships from crossing Hormuz for the time being, the kingdom had dramatically increased its oil exports to more than half the normal level, despite disruptions caused by the war in Iran. A successful sign for the kingdom’s ambitious contingency plan to bypass the Strait of Hormuz. To achieve this, Saudi Arabia stepped up crude oil shipments from Yanbu export terminals on the Red Sea coast, while diverting supplies away from the Persian Gulf and the Strait of Hormuz via the East-West pipeline.
Source: eia
Saudi Arabia, along with the UAE, is one of only two countries in the region that can divert significant amounts of oil to bypass Hormuz, which is a crucial lifeline for supplies. And since the beginning of the war, the Saudis had diverted oil via the 1,200-kilometer east-west pipeline to the western port of Yanbu. At the same time, it has quickly assembled a huge armada of tankers that have steamed to the Red Sea to load the oil and are now piling up around the port.
Riyadh now wants to increase export shipments from its Red Sea ports to 5 million barrels per day, a goal that is within reach. The East-West pipeline, which connects the Abqaiq processing center to Yanbu, has a rated capacity of 7 million barrels per day. But 2 million of those are needed to supply refineries in Riyadh and on the Red Sea coast at Yanbu and Jizan, near the Yemen border, as well as power generation and desalination plants.
Crude oil export deliveries from the Yanbu South and Yanbu North terminals averaged 4.4 million barrels per day in the five days to Tuesday, according to ship tracking data from Bloomberg. Exports through Yanbu have steadily increased after the kingdom quickly pumped crude through the 746-mile pipeline to the Red Sea.
Source: Vessel tracking data compiled by Bloomberg
Remarkably, the kingdom’s detour efforts have caused Yanbu’s crude oil exports to double in just over two weeks. Still, the detour will only be just enough to offset about half of the lost deliveries in the Persian Gulf this month. Even at Yanbu’s target level of exports, Saudi Arabia’s crude exports would still remain about 2 million barrels per day below pre-war levels. However, that is a far cry from several worst-case scenarios considered moments before.
Source: Vessel tracking data compiled by Bloomberg
According to Bloomberg calculations, about 56 million barrels of Saudi crude are stored on tankers stuck in the Gulf. Those cargoes were loaded in late February and early March but were unable to cross the Strait of Hormuz to the open sea.
At least 40 oil tankers, most of them very large and each capable of carrying about 2 million barrels of crude oil, are now anchored near Yanbu and waiting to take cargoes on board, tracking data show.
In addition, several ships stopped broadcasting automated position signals in the Arabian Sea while en route to Saudi port. They may not reappear on tracking systems until they are well outside the region. This could lead to upward revisions in export figures.
Tankers loaded since the detour began have mostly gone to Asia, with shipments to China and India dominating the flow. Cargoes are also on their way to South Korea, Pakistan and Thailand. Customers in Japan have been supplied from storage tanks on the island of Okinawa, where Saudi national oil company Aramco leases storage tanks capable of holding 8.2 million barrels of crude oil.
In the early days of the conflict, shipments from Yanbu mainly headed north to the Sumed pipeline that crosses Egypt to bypass the Suez Canal. Saudi Arabia typically loads crude oil for its customers in Europe and along the east coast of North America from a terminal in Sidi Kerir on Egypt’s Mediterranean coast.
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Price Crude oil – Brent June 2026 ($/barrel) – day cloud candle, log scale
ElecÂtricity
The real problem with America’s energy security is beginning to reveal itself
Constellation Energy’s high-profile attempt to revive one of Three Mile Island’s reactor plants, now renamed the Crane Clean Energy Center, has run into a four-year roadblock: the grid itself.
The company aimed to launch a restart in the second half of 2027 to provide about 835 megawatts of nuclear power to Microsoft data centers under a long-term agreement.
Still, PJM Interconnection, the regional grid operator, reports that full delivery could take until 2031. The delay is due to necessary transmission upgrades. The $1 billion loan secured by Constellation is only followed by delays…
Constellation quickly responded, insisting that the plant remains on schedule for operation in 2027 and that it is actively negotiating with PJM and local utilities to shorten the schedule. The 2031 date, the company said, only reflects the point of complete certainty on upgrades rather than a direct brake on earlier partial production.
The real culprit is not demand from data centers. The problem from tech giants and hyperscalers doesn’t come overnight. Because of decades of underinvestment in transmission lines, permit bottlenecks and overloaded interconnection queues, the power grid is ill-equipped for any peak, whether it’s nuclear restart, renewables or new industrial loads. PJM’s own studies show that the system has evolved since Three Mile Island closed in 2019, but the backlog of projects, both in generation and demand, continues to grow. Utilities and operators are under the same pressure, whether the request comes from a reactor or a server farm.
Less than a year ago, Bloomberg reported that Constellation Energy has advanced the restart date by a year. From the original 2028 completion date to 2027. The reactor owner noted that connection to the PJM grid would take another year, to 2028. Nine months later and that connection timeline has already been moved forward three years.
Already last month, the IEA warned that electricity demand is rising rapidly, while more than 2,500 GW of projects worldwide are stuck in connection queues, with the U.S. portion under particular pressure. Zerohedge also recently noted that transmission projects routinely face delays of 5 to 7 years due to permitting and interconnection hurdles.
The pattern is clear. Data centers expose weakness; they do not create it.
Until transmission costs and permits overtake the real need for reliable power, even the cleanest and most reliable power plants will remain idle longer than planned.
The delay at Three Mile Island is simply the latest symptom of a system that has been neglected for far too long.
It is the second major energy crisis of the decade. First Russia’s invasion of Ukraine, now the conflict between the US and Iran. This one, however, looks much more catastrophic.
The immediate impact of this energy crisis will be a resurgence of coal, especially across Asia, as power grid operators will be forced to switch to the dirtiest fuel to keep electricity affordable during the crisis.
“We are now seeing a second, very large energy shock,” Goldman commodities expert Samantha Dart tells Bloomberg.
Dart adds,“If you’re in Asia and going through this again, you may be changing your long-term strategy, relying longer on coal, building out renewables faster and reducing exposure to natural gas.”
Last week, JPMorgan’s commodities expert showed how Asia has become the epicenter of the global energy crisis. The shock is expected to spread worldwide, first Asia, then Africa and Europe, before eventually reaching the U.S., although the most acute impact there may be concentrated in California.
Source: J.P. Morgan Commodities Research, Kpler
Bloomberg notes that Japan is returning to coal-fired power generation. Coal-fired plants in India and Bangladesh are also running at higher capacity, while some European countries may soon have to burn more coal as disruptions in the Strait of Hormuz and damage to Qatar’s LNG export center put pressure on global gas supplies and cause prices to rise.
Fatih Birol, director of the International Energy Agency, has warned of the worst energy shock ever, saying that “high energy prices will cause governments, industries and households to look at other options.” Those options include “temporary upward pressure on the use of coal, both for power generation and the industrial sector,” Birol said.
We referred to Darts memo earlier this month that showed that natural gas prices in Europe and Asia have risen so much during the conflict between the U.S. and Iran that the switch from gas and oil to coal would already be beneficial to power grid operators.
Dart showed the price zones for Europe’s benchmark NatGas, TTF, where fuel exchange takes place:
The pink band is the lignite change range.
The gray band is the hard coal – switch range.
The green band is the industrial oil – switching range.
Source: ICE, S&P Global Commodity Insights, Goldman Sachs Global Investment Research
One conclusion is that Asia is likely to be the biggest switcher to coal because it is so heavily dependent on Middle East energy and already has large coal fleets. China is somewhat better insulated because it has diversified its energy supply.
Tony Knutson, coal specialist at Wood Mackenzie, warns that the energy shock is a “bigger disruption than the Russian war” and said countries without sufficient gas buffers to weather the storm will be forced to switch to coal. He added: “I don’t think they have a choice.”
Coal is suddenly back in power generation in Asia as countries rush to mitigate the LNG shortage caused by the war in the Middle East. Coal has not actually disappeared from most Asian economies, which rely on fuel for much of their power generation. Amid limited natural gas supplies due to the effectively closed Strait of Hormuz and skyrocketing LNG prices that few buyers in Asia can afford, countries are lifting previous restrictions on the use of coal-fired electricity.
Developed economies such as Japan and South Korea are increasing the use of coal-fired power generation, while developing countries such as China, India, Bangladesh and most of Southeast Asia are turning even more to coal as gas has become scarce and much more expensive.
Asian countries “are opening the tap of coal generation to offset rising gas prices and supply risks” says Anthony Knutson, global head of coal at Wood Mackenzie, to the Financial Times.
Coal cannot completely replace lost gas supplies, but it creates a welcome buffer to help Asia through the biggest supply disruption in energy markets ever.
China, India, South Korea, Japan and all of Southeast and South Asia are using the coal buffers they have created in recent years. Their insistence that diversification and energy security are more important than emission reduction targets is paying off, as spot LNG prices in Asia rose 70% to a three-year high that few countries in Asia Pacific can afford.
The current loss of gas supply, now that Qatar’s LNG offline is, can immediately be partially offset by higher coal consumption. Coal will therefore take market share from gas and LNG in the energy sectors in Japan, South Korea, China, India and Southeast Asia, said analysts at Wood Mackenzie in the first week of the now five-week war.
Scaling up renewable energy and an increased focus on domestic gas production, where possible, could also reduce gas losses from the Middle East, but these are not direct solutions, according to WoodMac.
Coal thus remains the direct fuel to replace gas. Although coal prices have risen 17% since the war began, the increase is limited compared to the 70% increase in spot LNG prices in Asia.
Americans increasingly interested in buying Chinese EVs
As the adoption of electric vehicles (EVs) in the United States increases, a segment of American consumers are increasingly attracted to Chinese models – largely because of their affordability, advanced technology and elaborate designs. However, strong trade barriers and political resistance continue to keep these vehicles out of the U.S. market, according to Reuters.
With an average price of $50,000 for a new car in the U.S., Chinese EVs – many of which sell internationally for less than $30,000 – are gaining traction because of their strong value for money. Models from automakers such as BYD, Geely and Zeekr often include premium interiors, advanced driver assistance systems and unique features such as in-car entertainment and mini-fridges, usually found in more expensive vehicles.
Reuters writes that industry experts note that Chinese automakers have rapidly improved both quality and innovation. China recently overtook Japan to become the world’s largest vehicle exporter, with growing sales in Europe, Latin America and parts of North America. Countries such as Canada and Mexico have already begun integrating Chinese EVs into their markets at lower tariffs.
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Source: Ember
In contrast, the United States has imposed tariffs of more than 100% on Chinese vehicles, effectively blocking their access. Policymakers express concerns about data security, regulatory compliance and the potential impact on domestic manufacturing jobs. Major U.S. auto industry groups have also called for continued restrictions, arguing that domestic automakers may face significant competitive pressures.
Despite these barriers, consumer interest remains strong. Surveys show that nearly half of potential U.S. car buyers see value in Chinese vehicles. A significant portion support their entry into the domestic market. At the same time, concerns remain about safety standards, data privacy and broader economic implications.
Auto dealers remain cautious. While many recognize that competitively priced Chinese EVs could attract buyers, only a small percentage currently support their introduction, citing uncertainty over U.S. regulatory compliance and market distortions.
For now, Chinese EVs are largely absent from U.S. roads. As global competition increases and affordability becomes a growing concern for consumers, pressure may increase for more access to cheaper electric vehicles in the U.S. market.
Solar shares rise as energy shock revives renewable energy trade
Goldman analyst Adam Wijaya asked clients whether the rise in SolarEdge, Enphase Energy and other solar stocks this year is reviving a familiar trade: higher crude oil and natural gas prices in Europe and globally, reinforcing the case for renewables as energy shock fuels a return to coal switching.
“Are we back to spinning the 2022 playbook?” said Wijaya.“It looks like it, given recent price movements in residential solar.”
Rising oil + gas prices in Europe/global + coal change begs the question, “Are we going to see more renewables in the EU given demand needs?
SolarEdge shares are up 64% year to date, largely tracking Brent crude oil and the European natural gas benchmark. The logic behind the trade is that higher fossil fuel prices improve the economics of alternative energy.
“As we move closer to midterm elections , some specialists are raising questions about the ‘blue playbook’ … that is, which individual stocks can leverage a policy shift in Energy focused on solar, wind and renewable energy.
The potentially stronger demand for renewable energy comes at a time when the Hormuz crisis is forcing countries to rethink energy security. With some energy managers likely to switch to coal to keep the lights on, the shock also breathes new life into the conversation about adding more solar and wind power to diversify the electricity mix.
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Supplementary analysis
In charts: US does not trust oil from Strait of Hormuz, while Asia risks losing out
The Strait of Hormuz has been called the carotid artery of global oil supply, and as Operation Epic Fury continues, Iran maintains a stranglehold on the critical supply route.
About 20% of the world’s oil and gas is typically shipped through the narrow waterway connecting the Persian Gulf to the Arabian Sea.
But Iran’s attacks on commercial ships have virtually halted traffic through the strait since the conflict began on Feb. 28.
Only 220 ships passed through the strait in March, according to data from the maritime analysis platform Marine Traffic. Before the war, thousands of ships crossed the waterway every month.
These actions have caused oil and gas prices to rise sharply. Brent, a global benchmark for oil prices, has risen well above $100 per barrel abroad. The average price of gasoline in the United States has risen above $4 per gallon.
President Donald Trump has threatened to launch attacks on Iran’s oil wells, power plants and critical oil infrastructure on Kharg Island unless the strait is reopened.
The image below shows how much oil travels through the Strait of Hormuz and its destination.
On average, 20 million barrels of oil and refined products flowed daily through the narrow gateway between the Arabian Peninsula and Iran in 2025.
That is about 25 percent of the global sea trade in oil, according to a February analysis by the International Energy Agency.
The strait is only 21 miles wide at its narrowest point, with shipping lanes in both directions only two miles wide.
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The vast majority of crude oil and condensate – a byproduct of natural gas – went to Asia (91%), according to a U.S. Energy Information Administration analysis based on Vortexa tanker tracking data from the first half of 2025.
Of these Asian countries, China and India absorbed about half of the crude oil fed through the Strait – 37% and 14%, respectively – followed by Japan and South Korea with 12% each. Sixteen percent went to other countries in Asia and Oceania.
The United States and Europe remained marginal buyers, receiving only 3% and 4%, respectively.
About three-quarters of the crude oil transported by tanker through the strait came from Saudi Arabia (38%), Iraq (22%) and the United Arab Emirates (14%). Iran shipped only 11%.
Crude oil exports crossing the Strait of Hormuz, 2025
In addition, the strait accounts for nearly 20% of global liquefied natural gas trade. Qatar, the world’s largest gas exporter after the United States, accounts for 93% of that volume.
By 2025, Asia received nearly 90% of liquefied natural gas flowing through the strait. Europe received just over 10%.
Among Asian countries, Bangladesh, India and Pakistan drew nearly two-thirds of their total liquefied natural gas supplies through the Strait of Hormuz last year.
Dependence on Gulf States
Japan (57%), South Korea (55%) and India (50%) depended on Gulf countries for at least half of their oil and gas imports by 2024. China drew about 35% of its supplies from the region.
In addition, Taiwan imported 40% of its oil and gas from the region by 2024, while Pakistan got more than 81% of its oil and gas imports from the Gulf region.
Some African countries, such as Mauritania (76%), Uganda (61%) and Kenya (55%), relied on the Gulf for more than half of their fuel.
Meanwhile, nearly 96% of Iran’s oil and gas exports through this route in 2024 were destined for one destination: Pakistan.
In Europe, about a third of energy imports for Greece (35%), Lithuania (32%) and Poland (30%) came from the Gulf states.
However, North American dependence on Gulf energy remains minimal. The United States received 10% of its imports from the Gulf states, and Canada received 5%.
Although regional producers have sought alternatives to the Strait of Hormuz, these options are not suitable as adequate replacements.
Saudi Arabia, for example, maintains an east-west pipeline capable of transporting about 5 million barrels of oil a day to the Red Sea. The pipeline system Abqaiq-Yanbu, however, has a maximum capacity of 7 million barrels. This terminal is already heavily used and cannot replace the strait.
The United Arab Emirates has an oil pipeline that bypasses the Strait – the Abu Dhabi Crude Oil Pipeline – but it has a capacity of only 1.5 million barrels per day.
As for Qatar’s liquefied natural gas, there is no alternative route.
In fact, the strait is only a vulnerability for exporters in the Gulf because there are no alternative pipeline routes to replace volumes by sea.
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This analysis is copyrighted by COMCAM. Texts may not be reproduced, copied, made public or duplicated without the express permission of COMCAM. Quotations or partial takeovers are also not permitted.
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