I recently noticed a rather unusual development in the oil market. Since the escalation of the US-Iran conflict at the end of February, the global crude oil market has been undergoing profound changes. The most surprising part is that in early April, WTI, for the first time in 4 years, surpassed the price level of Brent.

What lies behind this rare price reversal? It is the re-pricing of physical risk. Previously, Brent was always more expensive because it represented global maritime commercial flows. But when the Strait of Hormuz was truly closed, oil from the Persian Gulf, Oman, and the UAE suddenly had to bear a large “risk discount.” Shipping insurance costs surged, and part of the exports were completely halted.

In contrast, WTI has a major advantage. This oil is transported through an established pipeline network directly to refineries in the Gulf of Mexico, completely avoiding maritime risks. Germini Energy, a specialized energy company, made a very sharp observation: “The market reacts very quickly—buyers are no longer willing to pay extra for oil that ‘represents the global market,’ but instead pay extra for oil that can truly be held.”

A market structure has formed an extreme picture. Currently, the December WTI contract is trading around $77 per barrel, about $25 lower than in May. Investors are competing to buy physical commodities to cope with current supply disruptions, while betting that the conflict will ease in the coming months.

In the spot market, the situation is even more tense. Brent crude has broken above $140 per barrel. Stratas Advisors warned that when the US announces a naval blockade of Iranian ports, insurance fees will become more complicated, and spot Brent prices in the next few weeks could test the $160–190 range.

The most worrying part is that if oil prices stay high for the long term, it will trigger serious “demand destruction.” Consumers will significantly cut back on usage, and there is even a risk of a global economic recession. That is why experts believe this oil crisis could be the final pressure forcing both the US and Iran to return to the negotiating table.