Back in January, we predicted that 2026 would see global oil surpluses keeping prices moving in a downward direction. In fact, we even said that a price as low as $50 per barrel was on the cards. That clearly hasn’t happened!
As ever with oil price predictions, the geo-political premium is large and this year, it has been huge! Back in January, no-one at Portland thought that the US President would be so reckless as to start an unnecessary war with Iran and then react with surprise at the inevitable closure of the Strait of Hormuz. The result, as we know, has been the significant jumps in the price of oil that have made our $50 prediction look somewhat rogue!
This is market chaos, pure and simple
The increases in the oil price have been obsessively covered in the media and understandably so, with crude peaking at $119 per barrel (bbl) at the end of April. What has been less covered and certainly less understood, has been the huge discrepancy between crude prices and refined products. On the day that crude almost hit $120 / bbl, diesel was in fact trading at $183 / bbl, whilst jet fuel had hit $196 / bbl! Furthermore, these refined prices were actually down from their respective highs at the beginning of April; $234 / bbl for jet fuel and $217 / bbl for diesel.
So far, so predictable. War in the Middle East pushes the crude price up and with a shortage in European refining capacity, the cost of refined fuel goes up even more. What was perhaps less predictable was just how insanely volatile the market has been for the last 3 months.
As far as our records go back (1998), there has never been such huge daily swings (up and down) in the price of fuel. In the 10 years prior to 2026, the average daily movement in the price of diesel was 0.76 pence per litre (ppl). Bear in mind that this period included the huge falls in price that we witnessed during covid, followed by the tremendous rebounds in price that markets experienced post-pandemic; so, plenty of price volatility and some big market movements.
By comparison, in the period following the US and Israel attacks on Iran, volatility has been off the scale. The average daily movement in price since 1 March 2026, has been a breathtaking 3.87ppl. In April, the average daily movement in price was 5.36ppl!
This is market chaos, pure and simple and most of it has been driven by President Trump’s incoherent announcements on his Truth Social platform, which has become the defacto medium for announcing US policy.
The biggest single rise in prices was seen on the 2nd of April (13.39ppl!), when Trump posted; “Our Military, the greatest and most powerful (by far!) anywhere in the World, hasn’t even started destroying what’s left in Iran. Bridges next, then Electric Power Plants!”.
Two working days later (April 8th), prices plummeted 19.13ppl on the back of another set of White House posts; “The United States will work closely with Iran, which has gone through what will be a very productive Regime Change!” (just read that one again…) along with “the Strait of Hormuz WILL BE OPEN & SAFE. There will be lots of positive action! Big money will be made. In the meantime, our great Military is Loading Up and Resting, looking forward, actually to its next Conquest”…
So, what do we expect in the second half of the year, other than increasingly crazed ramblings emanating from the White House? As we have stated already, geo-political considerations will continue to “trump” everything, as they have done since the beginning of March.
Long-term supply and demand fundamentals seem a theoretical concern, when the immediate price of oil is purely dependent on whether hostilities cease and Hormuz reopens. Should the war end, along with a credible agreement for keeping the Straits open, then we can expect a prompt fall in the price of oil and, also, an end to the outlandish price volatility that we have faced for the last 3 months.
Geo-political considerations will continue to ‘Trump’ everything
Beyond that, however, do not expect prices to come down to the levels we saw at the beginning of January. The bottom line is that the supply of oil – particularly refined oil – will be curtailed for the rest of the year, as the damage to oil facilities (as a result of the war) is assessed and repairs commenced.
Refined products will take far longer than crude oil to start flowing again, because repairing a destroyed Vacuum Distillation Unit, hydro-cracker or isomerisation unit takes months, not weeks. On that basis, whilst crude prices may steadily drop, diesel and jet fuel will remain stubbornly high, and that is a recipe for continued inflationary pressure and unhappy consumers in the second half of 2026.
Image credit: iStock
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