Brent drops $1.60 despite increased regional escalation

Nov'26 Brent futures dropped from a high of $96.82/bbl at 02:01 BST to $94.57/bbl at 08:43 BST, more supported at $95.14/bbl at 11:00 BST (time of writing). Trump warned Iran that any retaliation would trigger a “much harder and higher” US response, saying a larger attack was “waiting in the wings” and warning there would be “little left” of the Islamic Republic. CENTCOM subsequently struck IRGC air-defence sites, radars, maritime assets, mine-laying capabilities and communications facilities, with impacts reported around Chabahar, Konarak, Bandar Abbas and Qeshm. Iran claimed retaliatory missile and drone strikes on US facilities in Iraq, including Erbil, while Kuwait, Jordan and Bahrain reported incoming Iranian missiles and drones. Jordan said it intercepted 10 of 13 missiles, while Iranian claims of heavy US casualties at Camp Titin remain uncorroborated; Bahrain ordered people to shelter amid a reported attack on Sheikh Isa airbase. The IRGC have announced two ships hit mines in the Strait of Hormuz and stopped this morning. Russia confirmed a fire at the 700kb/d Ust-Luga terminal after a reported 52-drone attack, although the extent of damage remains unknown. In Washington, US refiners pressed Trump over high RFS quotas they say are unattainable and raising gasoline costs, while praising the Jones Act waiver and being asked how they could process more Venezuelan crude. The Fujairah data for the week ended 31 Aug show a further draw in oil-product stocks, with heavy distillates/residual fuel oil down 14% w/w, according to the latest Fujairah Oil Industry Zone data. The key read-through is tightness in bunker/fuel-oil availability. Fujairah’s residual stocks had already been running around 35% below July levels in August, with exports rising while imports fell sharply, turning the hub into a net exporter. Finally, the Nov/Dec’26 and Nov/May’27 Brent futures spreads are at $3.54/bbl and $13.83/bbl, respectively.

This morning in Dated, we saw better buying in the front with balmo Sep'26 DFL trading up to $3.20/bbl with 7-11 Sep'26 1w trading up to -$0.05/bbl and $4.00/bbl Sep'26 vs 9 Sep'26 at-$0.65/bbl. We also saw 21-25 Sep/Cal Oct'26 trade $2.75/bbl and bid over. Further down the curve we saw 2 way flow on Q127 DFL, bid up to $1.79/bbl from a refiner with spreads higher.

This morning was very quiet in Brent/Dubai, as we traded slightly up in the Oct Brent/Dubai, but with very little OTC interest. The Oct opened around $1.70/bbl and traded between $1.65/bbl to $2.20/bbl. The Dubai spreads traded largely unchanged from last night, the Oct/Nov Dub spread trading between $4.50/bbl to $4.80/bbl. The Dubai partials traded strongly, the balmo pricing around $12.70/bbl, but the balmo spread was well offered OTC between $9.90/bbl to $10.50/bbl.

Structure opened higher this morning on higher crude, Spreads rallied with Oct/Nov'26 trading up from $35.00/mt to $37.00/mt while Nov/Dec'26 also gained $2.00/mt last trading at $23.00/mt. Oct'26 Sing cracks were choppy they initially traded up from $19.50/bbl and topped out at $20.20/bbl during the window before selling back down $19.60/bbl post window.
There was little spoken of Euro 0.5 spreads this morning, Oct/Nov'26 last traded at $19.50/mt. Euro cracks traded lower this morning, Oct/Nov'26 sold down from $6.45/bbl to $5.85/bbl, most of the selling was on screen. Euro cracks have flattened out down the curve, the rolls are trading near flat all the way out to H127. Oct'26 0.5 e/w was implied higher as well as there being real buying on screen at $83.00/mt, it last traded at $87.00/mt.

380 spreads opened higher this morning on higher crude with Oct/Nov'26 at $16.75/mt, as the morning progressed it sold off down to $15.00/mt, Nov/Dec'26 was range-bound trading around $12.00/mt..50/mt. There was decent Oct'26 380 crack volume traded on screen this morning, it sold down from -$5.00/bbl and bottomed out at -$5.80/bbl, it last traded -$5.60/bbl. Oct/Nov'26 Barge spread traded down from $11.75/mt to $11.25/mt in low volume while Oct'26 Barge crack was offered down from -$11.60/bbl to -$12.00/bbl with most of the volume coming from screen.

This morning in distillates, Sing gasoil spreads were offered, with Nov/Mar trading from $18.70/bbl down to $18.40/bbl. Front E/W sold down to -$115/mt in Oct before finding good support and bidding back up to -$104.50/mt post window. Oct regrade went well bid post window, moving from -$2.50/bbl up to -$1.60/bbl lifted, while regrade rolls turned better bid. Prompt ICE gasoil spreads sold off post window, with Sep/Dec trading from $225/mt down to $199.50/mt, while Nov cracks weakened to $75.93/bbl.

This morning in gasoline, MOC better offered, particularly in Nov'26 MOC with Oct'26 MOC better bid. Strong morning for the East seeing E/W stronger – trading up to -$8.90/bbl in Sep'26 end of window with spreads better bid. Dec/Jan'27/Feb'27 92 fly gets lifted at $1.00/bbl by refiners in the morning with Dec/Jan'27 92 seeing good buying this morning – with buying chasing up from $2.20/bbl to $2.50/bbl. EBOB stronger than we saw yesterday, with Oct'26 EBOB crack trading $30.50/bbl end of window with spreads finding some buying too.

This morning in naphtha was mixed, with MOC initially better bid on MOPJ flat-price buying pre-window before the tone softened into the window as crude came lower, front spreads were offered and cracks weakened. MOPJ cracks came off, with Oct'26 moving from around $2.15/bbl to $2.00/bbl, while Q1'27 was around -$0.50/bbl and Q2'27 around -$3.40/bbl; spreads were choppy but generally softer, with full-mo Sep/Oct'26 around $24.00/mt, Oct/Nov'26 easing from $30.50/mt to $29.00/mt before recovering to $30.00/mt, and Nov/Dec'26 from $29.00/mt to $28.25/mt amid scale-back selling. E/W was mixed, with backend better bid but the front offered, with Oct'26 a touch lower at $52.00/mt, Q4'26 around $51.00/mt, Q1'27 around $40.00/mt and Cal 27 around $30.50/mt. NWE naphtha was softer on cracks and spreads, with Oct'26 cracks moving from around -$3.80/bbl to -$3.95/bbl, while Q1'27 was around -$5.05/bbl, Cal 27 around -$7.05/bbl; spreads were offered too, with Oct/Nov'26 around $29.00/mt, Nov/Dec'26 at $27.00/mt, Dec/Jan'27 at $15.50/mt and Jan/Feb'27 at $16.50/mt.

This morning in NGLs, there was some early FEI flat price buying in Q127 from $673.00/mt to $678.00/mt. Deferred FEI spreads had good buying from both Banks and Majors, with Oct'26 27 /Dec'26 27 trading at -$5.50/mt, and Aug'27 27/ Sep'26 27 was lifted at -$3.00/mt. Also had FEI fly buyers in the deferred, seeing Sep/Oct'26/Nov'26 27 lifted at -$1.50/mt and Feb/Mar'27/Apr'27 27 at the same level, again with Majors buying. Back in the front, Oct/Nov'26 FEI was trading at $30.00/mt across the morning, $1 stronger than yesterday’s close, and Nov/Dec'26 traded down to $24.00/mt having opened the day at $26.00/mt. Oct'26 LST/FEI initially traded at -$374.00/mt, before strengthening to print -$368.00/mt end window, and Q4'26 was getting lifted at -$340.00/mt and -$338.00/mt. End window on screen, Oct'26 FEI flat price was lifted at $768.00/mt.

Bonds vigilantes are back as commodities jump as Middle East crisis intensifies.

Bonds are breaking. Commodities are ripping. The Middle East crisis just lit the fuse on a fiscal reckoning G7 governments have been avoiding for years.
The bond market's message is simple - yields keep rising until something breaks. Either the equity market cracks, or central banks blink and QE comes back.
The evidence is stacking up fast:
• UK 30-year yields - highest since 1998
• Germany 10-year - highest since 1998
• Japan 10-year - highest since 1996
• US 10-year - 19-month high
• US 2-year - broke out to a 2-year high

OIS pricing now shows a 70% probability the Fed hikes on September 16th - a stunning reversal from a market that spent most of this year pricing cuts.

This is what happens when inflation outruns political will. Governments printed, spent, and deferred the bill for years. The bond market is now the judge.

The fastest way to defuse this - de-escalate the Middle East conflict and force Treasury departments to actually confront fiscal deficits instead of leaning on central banks to paper over them. Neither looks likely near-term.

Bloomberg reports GCC members are redirecting more capital generation toward domestic priorities, a quiet but structural shift. For international markets, that means tighter external capital supply just as global financing demand rises. Less petrodollar recycling into Treasuries and credit is a multi-year rebalancing, not a one-quarter story.

Of course, as US mortgage rates near 7% the screws will continue to turn on the housing market. Following China, Canada (down -7% YoY), Germany (down -6.2% YoY) and now Australia cracking.

The US attacked Iran overnight. And the Iranians predictably countered with strikes on Jordan, Kuwait and Bahrain. With Brent breaking out of a consolidating triangle.

Precious metals fell hard gold down -2.7%, and silver -3.7% as the dollar strengthened on rate hike expectations.

Meanwhile the S&P 500 sits on key support at $7,609, with MACD trending lower, a break here will see selling stops triggered. (Chart 3, Trading View)

Rates, capital and commodities are converging on the same problem: the price of scarcity is rising. Governments need more capital, traditional pools of external capital may be becoming less dependable, and physical constraints are reappearing across commodity markets.