Hormuz Watch: Crude Came Back. Refined Fuel Didn't.

Where We Left Off

Our last update, on July 21, said the escalation scenario had become the base case. The strait was effectively closed under a naval blockade, Brent had topped $91, and we said we would mark it again when the readings moved.

They moved. In September, Brent futures reached about $110 a barrel, and physical cargoes traded above $120. Houthi attacks pushed tankers out of the Bab al-Mandab, the strait at the southern end of the Red Sea. Oil that skips Hormuz by pipeline now leaves the Red Sea through Suez instead, a much longer trip to Asia.

Then the crisis changed shape. The strait is moving crude again. Kpler, a firm that tracks tankers and trade flows, put crude crossing Hormuz at 13.5 million barrels a day in the week to September 28, the same as before the war. What has not come back is refined fuel: the diesel, jet fuel and other products that Gulf refineries ship out. That flow was 677,000 barrels a day, against 3.6 million before the war. About a fifth of normal.

Meanwhile, the world's other large fuel exporters have pulled back. Ukrainian drones have been hitting Russian refineries all year, and Moscow has banned diesel exports since July. China stopped approving most fuel exports for October. The shortage has moved from the oil field to the refinery, and from crude to diesel.

This watch runs on one habit: find the chokepoint, follow the price. Eleven weeks after our last update, the chokepoint is somewhere new. So this week, Hormuz Watch runs as a five-part series that follows one barrel from the strait to the pump: the ships that carry it, the refineries that turn it into fuel, the people who pay for it, and what happens when it ends. It starts with the scoreboard.

The Dashboard

Since June, this watch has tracked five readings: Brent and its war premium, the physical regime in the strait, gas at the pump, the forward Fed metric, and oil's fear gauge. The pressure now sits downstream of the strait, so the dashboard follows it. Brent now shows two prices, physical cargoes and futures. The strait now shows two flows, crude and refined fuel. Diesel replaces gasoline at the pump. The Fed metric and the fear gauge rest this week, and two new readings come in: the diesel margin and the cost of hiring a supertanker. We will refresh all six in each part.

• Crude through Hormuz13.5Mbbl/dayBack to prewar7-day average to Sep 28. At least eight tankers were hit in or near the strait Sep 28 to Oct 4.Kpler via CNBC; UKMTO
• Refined fuel through Hormuz677Kbbl/dayDown 81%Prewar: 3.6M a day of diesel, jet fuel and other products. 7-day average to Sep 28.Kpler via CNBC
• Brent, now vs. December$114vs. $102Relief priced inPhysical cargoes, Sep 29, vs. December futures settle, Oct 2. Buyers pay about $12 more for oil now.EIA spot; futures settlement
• Diesel margin$114per bblRecord territoryDiesel minus the crude it is made from, Sep 29. 2025 average: $32.EIA spot; our calculation
• Supertanker day rate$1.22Mper dayNearly 6x prewarGulf to China route, Oct 2. Late February, before the war: $209K. Record: $1.27M on Sep 21.Baltic Exchange; Seatrade; LSEG
• Pump diesel$6.38per galUp 70%National average, Sep 28, vs. $3.75 a year earlier. Regular gasoline: $4.47, up 43%.EIA weekly retail

How Crude Came Back

Three things put crude back on the water. U.S. Navy escorts. A shuttle system, in which smaller tankers carry crude across the strait to larger ships waiting in the Gulf of Oman. And pipelines that skip the strait entirely: about 40% of Gulf crude now leaves by pipeline, up from 17% before the war.

It is working, and it is under fire. Between September 28 and October 4, at least eight tankers were struck by projectiles in or near the strait, the latest on Sunday. On Thursday, a projectile struck inside Saudi Arabia's port of Yanbu, starting a fire and briefly halting loading. Yanbu is where the East-West pipeline, the largest route around Hormuz, reaches the Red Sea. Drones launched from Iraq hit that pipeline's pumping stations on September 10, and Saudi Arabia shut it down the next day. It restarted at reduced rates around September 22.

Where the Shortage Went

One way to picture it: crude is wheat, and diesel is flour. The wheat shipments are arriving again. Three of the world's big mills are damaged, rationing, or keeping their flour at home.

The Gulf's refineries

Before the war, refined products moved through Hormuz at 3.6 million barrels a day. Now the figure is about 677,000. Refineries in the Gulf have been attacked during the war, and their exports through the strait have recovered far less than crude has.

Russia

Ukraine has made Russian refineries a primary target. The IEA estimated that a Russian refinery was hit about once every three days in the first eight months of 2026. In September, three of Russia's six largest diesel refineries cut output or shut down, according to Reuters. Moscow banned diesel exports in July and has extended the restrictions through October. A year earlier, Russia shipped about 2.5 million tons of diesel a month, roughly 600,000 barrels a day.

China

China stopped issuing most fuel export permits for October while it rebuilds its own stocks. Its diesel inventories sit about 20 million barrels below the level Beijing requires before allowing exports, according to Kpler data cited by Reuters. Whether permits resume after the National Day holiday ends on October 7 is the next signal to watch.

The price that tells you

Here is the result in one number. On September 29, a barrel of diesel in New York Harbor sold for about $210. The barrel of crude it is made from sold for about $96. Diesel was worth 2.2 times the crude. In 2025, that ratio averaged 1.5.

The difference between the two, about $114 a barrel, is the refining margin. The industry calls it the crack spread. It averaged $32 in 2025. In mid-August it crossed $100 for the first time on record.

Look at the two lines after May. WTI crude fell as the June deal arrived and has not returned to its spring highs. The margin kept climbing. Since July, diesel has sold for more than twice the price of crude every month. That gap is the chokepoint.

Why Diesel Is the One That Hurts

Diesel moves trucks, trains, ships, tractors and construction equipment, and it runs backup generators. Heating oil, nearly the same fuel, warms many homes in the Northeast. When gasoline spikes, people can drive less. A farmer cannot skip the harvest, and a trucking company cannot skip the delivery.

The pump shows the difference. On September 28, diesel averaged $6.38 a gallon nationally, up 70% from a year earlier. Regular gasoline averaged $4.47, up 43%. AAA's national diesel average set records around $6.50 in late September, and U.S. diesel inventories are at their lowest level for the season since record-keeping began in 1982.

Governments are responding. On Friday, the G7 agreed to release 100 million barrels from emergency stocks over four months, starting with a large release of diesel within 20 days. The G7 did not say how the total splits between diesel and crude. For scale, 100 million barrels equals about a fifth of the 507 million barrels the world has drawn from its inventories since February. In Washington, the administration floated a ban on U.S. diesel exports, then ruled it out on Friday. A White House order on diesel prices is reportedly in preparation.

Who Pays, Who Gets Paid

The rest of the week follows the money downstream.

• Tuesday, October 6: The ships. The benchmark rate to hire a supertanker is nearly six times its prewar level. Who gets paid, and how fast booms like this have ended before.
• Wednesday, October 7: The refiners. Record diesel margins, the companies collecting them, and the risks to those margins, from policy to the math of peak earnings.
• Thursday, October 8: Who pays. Truckers, airlines, farmers and households heating with oil, with the pass-through math worked out.
• Friday, October 9: The exit. Three scenarios, and what each one does to every company in the series.

What If a Deal Lands Tomorrow

The strongest argument against this series is that the crisis is already ending. Here is that case in full.

• Crude is flowing. The strait is back to prewar crude volumes, and Saudi Arabia resumed loadings at Yanbu in late September.
• The futures market expects relief. Physical Brent cargoes traded at $113.96 on September 29. Brent for December delivery settled at $102.25 on Friday. Buyers are paying about $12 more for oil now than for oil two months out, which is how a market signals it expects supply to improve.
• Relief comes fast. After the April 8 ceasefire, Brent fell more than 13% in a single day. During the de-escalation that led to the June deal, it fell from $118.03 on April 29 to $73.74 on June 24, a 37.5% drop in eight weeks.
• The export curbs are temporary by design. China sets fuel export permits month by month. Russia's diesel restrictions run through October. The G7 release adds supply over the coming months.
• Demand has bent. High prices have cut consumption. In August, the IEA projected that world oil demand would shrink this year.

Our read: much of that is right, for crude. A deal would likely hit crude prices and tanker rates first, because both can move on a headline. Diesel would come last. Damaged refineries take months to repair, empty storage tanks take months to refill, and winter heating demand starts now. The EIA expects the diesel margin to stay above $2 a gallon, about $84 a barrel, through November, then ease gradually into mid-2027. That ordering, crude first and diesel last, runs through the rest of the week.

The other direction is live too. At least eight tankers were hit in seven days. Yanbu was struck on Thursday. A third U.S. aircraft carrier group is due in the region by the end of November. Brent's high this year was $126, on April 30.

The Bottom Line

In June we wrote that prices tell the truth before narratives do. Two prices are telling two different stories right now. Crude at $102 says the strait is working again. Diesel at $210 a barrel says the system downstream of it is not.

The chokepoint moved. For the rest of this week, we follow it. Tomorrow: the ships, and why a supertanker now costs $1.2 million a day to hire.