European middle distillate markets rallied strongly on Monday as the US–Israeli conflict with Iran entered its third day and risks to shipping in the strait of Hormuz increased. Traders highlighted the scale of the challenge if physical trade faces further disruption.
Front-month Ice gasoil futures peaked intraday at $922.50/t at 08:17 GMT, up by $169.75/t, or 23pc, from Friday's close. The contract, which is settled with physical diesel deliveries and is Europe's most liquid oil product derivative, has not closed as high as this intraday peak since October 2023.
Front-month gasoil's premium to front-month Ice Brent futures was $43.67/bl at the same time, higher by $15.25/bl since Friday's close. Closing levels have not been this high since December 2022. In early over-the-counter trading, jet fuel's premium to Ice gasoil reached $112.50/t, brokers said, more than 50pc above Friday's close.
By midday, front-month gasoil and jet premiums to Ice Brent had eased slightly to about $41.90/bl and $49.40/bl respectively, still up by around $13.30/bl and $16.80/bl since Friday
Europe relies heavily on Mideast Gulf diesel and jet fuel (see table). The EU and UK imported more than 50mn t of diesel and gasoil in 2025, according to Vortexa, and more than 25mn t of jet fuel. Around one-fifth of those diesel and gasoil imports transited the strait of Hormuz, a crucial route for Mideast Gulf exports, along with more than half of jet fuel imports.
One European trader said oil prices opened near the top of their team's expected range, adding that Europe "cannot stand" prolonged disruption through the strait. Another trader said: "We're all going to pay a lot if it's not going to stop quickly." Both stressed the extreme uncertainty surrounding the conflict's trajectory.
Traders say jet fuel supply is most at risk. Mideast Gulf exports through the strait of Hormuz accounted for more than one-fifth of global jet fuel shipments in 2025.
Ice data show long positions in gasoil futures taken by investment funds with no physical price exposure have surged in recent weeks as Mideast Gulf disruption risks grew. Total long positions reached a 13-week high in the week to 24 February, while net long positions hit a 14-week high.
Since air strikes started on land targets across the Mideast Gulf at the weekend, regional shipping has also been affected. Explosive projectiles have struck at least three vessels near the strait of Hormuz. Several containership owners have suspended transits and insurers have begun cancelling regional war-risk cover. Most shipowners are now avoiding the strait, shipping sources say.
Denmark's Maersk has also stopped using the Bab el-Mandeb strait, diverting vessels around the Cape of Good Hope. Reduced confidence in passing Bab el-Mandeb could lengthen voyage times for Europe's diesel and jet imports, increasing the region's exposure to supply shocks.
These risks come as regional refining capacity is also being affected by the conflict. Saudi Aramco has closed the 550,000 b/d Ras Tanura refinery on Saudi Arabia's east coast after it was struck by debris from intercepted Iranian drones early on Monday. State media reported "limited damage" and said local product supply was not affected.
| Mideast Gulf refined product trade | mn t | |||
| Product | ME Gulf exports | % of global | Mideast Gulf exports to EU/UK | % of total to EU/UK |
| Naphtha | 55.39 | 40.3% | 0.00 | 0.0% |
| Gasoline and components | 13.02 | 5.1% | 0.27 | 5.3% |
| Jet and kerosine | 18.83 | 22.7% | 14.39 | 54.3% |
| Diesel and gasoil | 52.96 | 12.8% | 10.67 | 20.9% |
| Fuel oil | 38.50 | 16.2% | 1.05 | 8.0% |
| Source: Vortexa | ||||
