Middle-East Oil Prices Collapse as Irans Sanctions Relief Spurs Surplus Supply

Physical crude cargoes are now trading at steep discounts worldwide, a shift that is reshaping global oil flows. The change follows a 60‑day interim deal between the United States and Iran that ended a war that began on 28 February 2026 and temporarily lifted U.S. sanctions on Iranian oil.

The Reuters report notes that the agreement allowed shipping to resume through the Strait of Hormuz, a chokepoint that had carried about a fifth of global oil and liquefied natural gas before the conflict. With the corridor reopened, Tehran has begun to increase exports, targeting markets beyond China after Washington granted a temporary waiver.

The release of cargoes that had been stranded in the Gulf, together with a surge of offers from Abu Dhabi National Oil Co., Kuwait Petroleum Corp. and Iraq’s State Oil Marketing Organization (SOMO), has boosted prompt supply and pushed Middle‑East benchmarks—Dubai, Oman and Murban—into discounts. Asian refiners, which usually book cargoes two months ahead, have already secured shipments for delivery up to August.

According to the Reuters data, cash Dubai fell to a discount of 27 cents a barrel on Tuesday, after peaking at more than $60 in March. Oman and Murban widened to discounts of 96 cents and 67 cents, respectively. The spread between Dubai and Brent is now in contango, indicating ample supply.

ADNOC has sold at least 48 million barrels of spot crude this month for June‑August loading, further adding to regional supply. The decline in Middle‑East prices has made Gulf crude cheaper against Brent, enabling energy majors such as Exxon Mobil, Eni and TotalEnergies to send supertankers of crude—including Abu Dhabi’s Murban and Upper Zakum—to Europe.

Conversely, the weak Middle‑East prices have closed the arbitrage window for Atlantic Basin crude to Asia. The spot differential for U.S. West Texas Intermediate Midland crude has flipped from a premium a week ago to a discount of about 45 cents. Rystad analyst Janiv Shah said that U.S. crude export premiums to Asia are expected to erode and Atlantic Basin differentials to soften as the weeks progress.

U.S. crude exports to Asia are set to ease in the third quarter after reaching a record high of 2.634 million barrels per day in May, according to ship‑tracking data from Kpler.

European and West African grades have also widened discounts amid the surge in Middle‑East supply. North Sea Forties crude BFO‑FOT, one of the six grades that set the dated Brent benchmark, traded on Monday at a discount of $1 a barrel to dated Brent, the lowest since November and sharply down from a record premium of $21.50 a barrel in April, according to LSEG data.

Kpler analysts noted that Europe is becoming the clearing point for crude that either lost its eastern outlet or now travels west because it is cheap enough. For West African grades, Eni sold Angolan Nemba crude for August loading to Glencore at $7.95 a barrel below dated Brent, while ExxonMobil offered Angolan Hungo for loading on 6‑7 August at a discount of $4.05 per barrel to dated Brent.

S&P Global Energy Platts assessed Congolese crude Djeno at a discount of $10.80 per barrel to dated Brent, the lowest since 2013. Angola’s Nemba was priced at a six‑year low discount of $8 per barrel.

The surge in Middle‑East supply is a direct consequence of the temporary U.S. sanctions relief. The U.S. Treasury issued a 60‑day waiver allowing Iran to sell crude and petroleum products through 21 August, a move that is expected to increase Iranian exports beyond China.

The war that began on 28 February 2026 had earlier closed the Strait of Hormuz on 4 March, disrupting global oil flows. The 60‑day interim deal has now restored partial shipping, but the overall market remains volatile as the conflict continues.

In sum, the combination of a temporary sanctions lift, the release of stranded cargoes and a wave of new offers from Gulf producers has pushed Middle‑East benchmarks into discounts, altered trade flows, and widened price differentials across global markets. The situation remains fluid, with further developments expected as the conflict and the temporary waiver evolve.