Crude prices rose in October amid continued tensions in the Middle East 

Brent crude prices rose in October, from $102 per barrel (bbl) at the beginning of the month to settle at $117.54/bbl at month end. The price rise occurred as the conflict in the Middle East continues, with anticipated renewed major hostilities after the midterm elections on November 3. October saw a significant increase in vessel attacks in the Persian Gulf, with UK Maritime Trade Operations recording more than 30 incidents during the month. Media reports indicated that the US and Israel were preparing options for possible renewed strikes on Iran after the November 3 midterm elections, while diplomatic efforts continued. 

Washington relaxed several sanctions on Russian diesel and the “shadow fleet” of tankers carrying Russian oil, helping to ease pressure on fuel prices, with diesel averaging more than $6 per gallon. Diesel prices can contribute to broader inflation because of the fuel’s importance to trucking, transportation, manufacturing, agriculture and industry. Washington also waived much of the recently passed Graham Act, which would have imposed sanctions on third-party countries, including India and Turkey, for purchasing Russian energy products. 

Four diesel shipments from Russia are currently headed for the US Atlantic Coast after sanctions relief, albeit there will likely be legal issues for its import and resale given continued European sanctions on Russian oil products. A temporary energy ceasefire between Russia-Ukraine brokered by the US failed to last with Ukraine continuing its drone campaign on Russian refineries after a two-week hiatus, while Russia never stopped striking Ukrainian energy infrastructure. Renewed attacks on Russian refining capacity risk further constraining diesel production and exports, adding pressure to already tight global suppliers and keeping diesel prices elevated.  

Oil markets face growing shipping constraints  

Oil has continued to leave the Strait of Hormuz in convoys of very large crude carriers (VLCCs), protected by the US military, before being transferred ship-to-ship in the Gulf of Oman through shuttle operations. While this approach has helped maintain larger volumes of Middle Eastern oil exports, it has placed additional strain on logistics with shipping accounting for around 30% of the cost of a landed barrel of oil now. 

Ship to ship (STS) transfers reduce vessel availability and add several days to cargo journeys before crude reaches its destination refinery. The addition of Saudi Arabian oil to these vessel flows, following Houthi attacks on the East-West pipeline’s export route, has pushed STS operations towards their operational limits. Queues have developed for essential resources, including tugboats and labour. 

The resulting competition for available tankers has driven freight rates sharply higher. In mid-October, VLCC rates for voyagers from the Persian Gulf to Asia rose to more than $1.3 million per day, compared with an average of $55,000 per day in 2025. 

Crude oil in transit has reached a record high of nearly 1.3 billion barrels, reflecting the longer shipping distances resulting from geopolitical disruption. For refineries, longer voyages mean crude remains tied up in transit for longer, increasing the amount of oil required to sustain supply chains and raising the cost of maintaining reliable feedstock deliveries.  

Japan, for example, has become one the largest recipient of US crude oil as governments diversify away from Middle Eastern supplies towards sources considered more secure, despite the longer journey. 

US natural gas prices remain an outlier 

US natural gas futures prices dropped to a two-year low of $2.50 per million British thermal units (MMBtu) in late October.  Prices fell amid milder than expected autumn temperatures across the United States and limited hurricane related disruption to the power grid.  

Supply across the country remains robust at around 113.3 billion cubic feet per day (Bcf/d) in the Lower 48, while storage injections have pushed inventories above their five-year average. 

One factor keeping US prices significantly below those in Europe, where prices are above €100 per megawatt-hour (MWh), equivalent to approximately €29 per million British thermal units (MMBtu) is limited US liquefied natural gas (LNG) export capacity, which constrains the amount of natural gas that can reach international markets. This price differential can provide a cost advantage for energy-intensive US industries relative to Europe and Asia. Heavy users of natural gas, including fertilizer plants and data centers, therefore face lower energy costs in the US. 

The price gap is particularly evident amid continued disruption in the Middle East, with supply from the region yet to fully recover.  

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