By Callum Keown
The energy shock from the Iran war is threatening to become a full-blown global crisis. But you wouldn't know it looking at U.S. oil prices.
West Texas Intermediate futures were trading at around a $20 discount to Brent crude early Thursday, the largest spread since March 2013--aside from in April 2020 when West Texas Intermediate futures closed in negative territory, according to Dow Jones Market Data.
Why Are Crude Prices Diverging?
Geography is playing a key role in the split between U.S. oil prices and other international benchmarks.
For example, Dubai crude futures are trading at $136 a barrel and Oman crude has topped $150 a barrel, and Brent crude was at $111. In contrast, WTI futures remain at around $96 a barrel.
"In this environment, proximity and timing have become critical pricing factors," Saxo's head of commodities strategy, Ole Hansen wrote Wednesday. "Access to prompt supply -- particularly barrels that can reach Asia quickly -- commands a premium, while barrels further removed from the physical tightness trade at a discount."
"Markets less directly exposed to immediate physical shortages have shown a more subdued response," he added.
Are U.S. Policy Measures Helping?
The Trump administration has implemented a number of measures to help alleviate oil supply disruption, but there's one they haven't deployed that might be helping -- a U.S. crude export ban.
Goldman Sachs analysts said the widening spread could "reflect that the market is upgrading its probability of U.S. export restrictions," in a note Wednesday. Though, they said export curbs were not their base case.
"Crude export restrictions could sharply reduce international demand and thus prices of U.S. WTI crude vs. international benchmarks," they added.
Why Is the Energy Shock Worse for Europe?
Europe is heavily reliant on imported energy. The European Union imported 600 billion euros worth of energy in 2022 -- the year Brent crude prices last spiked above $100 a barrel following Russia's invasion of Ukraine. That fell to around EUR400 billion in 2023 and just below EUR400 billion in 2024.
It isn't just oil prices that are an issue for Europe, but liquefied natural gas $(LNG)$ as well.
Cedric Gemehl, European analyst at Gavekal, told Barron's that overnight attacks on LNG infrastructure in the Middle East have escalated the size and duration of the price risk. That's a problem for Europe, which is more dependent on global markets, with LNG accounting for about 40% of the region's gas supply.
European natural gas prices jumped 13% to around EUR62 per megawatt-hour Thursday and are now up 93% since the Iran war began. But that's still well below the more than EUR300 per megawatt-hour reached in early 2022.
A potential U.S. export ban would add further pressure on the European economy as the continent is a major buyer of U.S. crude -- more so since its move away from Russian oil.
Will U.S. Gasoline Prices Fall?
While a potential U.S. export ban would widen the spread between WTI and other benchmarks, it won't lower gasoline prices, according to Jason Bordoff, founding director of the Center on Global Energy Policy at Columbia University.
"Lower domestic crude prices would not translate into comparable reductions in gasoline or diesel prices, which are set in global markets. Instead, such restrictions would introduce inefficiencies that could ultimately raises costs," he said.
While consumers in Europe may have it worse in the weeks and months ahead, that may not offer much comfort to Americans if the war persists.
Write to Callum Keown at callum.keown@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 19, 2026 11:44 ET (15:44 GMT)
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