The first half of 2026 witnessed significant price swings in global crude oil and fuel oil markets, largely driven by Middle East conflicts. In early March, shipping disruptions in the Strait of Hormuz pushed Brent crude futures to a high of $118 per barrel. Subsequently, the market reversed sharply, with international oil prices returning to pre-conflict levels, subjecting the entire energy supply chain to a roller-coaster ride.

Zhao Xuyi, a senior crude oil analyst at Guotai Junan Futures, noted that Middle East tensions have been a key factor influencing crude and fuel oil price movements throughout the first half.

Jia Yeping, an analyst at Zheshang Futures, recapped the period: from January to February, the market traded on expectations of an oil surplus, leading to narrow-range price fluctuations. In March, escalating Middle East conflicts and the blockade of the Strait of Hormuz contracted global crude supply, triggering a sharp price surge. April and May saw prices holding at elevated levels amid continued geopolitical back-and-forth. By June, a U.S.-Iran agreement was reached, leading the market to price in a supply recovery and causing oil to swiftly give up all its earlier gains.

Du Bingqin, Director of Energy and Chemical Research at Everbright Futures Research Institute, views the core logic behind this wide price volatility as the rapid escalation and subsequent de-escalation of geopolitical risks.

As a downstream product of crude oil, fuel oil faces dual pressures from upstream cost volatility and its own supply-demand imbalances, resulting in price elasticity significantly higher than that of crude, Du analyzed. Fuel oil's fundamental structure is relatively weak in absorbing shocks, meaning crude price swings can further amplify its supply-demand contradictions.

Jia Yeping added that stable bunkering demand in Asia, coupled with persistently low regional inventories, led Asian refineries to proactively reduce operating rates after crude price hikes squeezed their margins, thereby tightening fuel oil supply. Simultaneously, while several countries released strategic petroleum reserves to offset supply gaps, fuel oil lacks such a buffer mechanism, which explains its outperformance relative to crude during the rally.

Market participants believe Brent crude prices will continue to fluctuate within a wide range in the second half of the year, with geopolitical events remaining the core factor influencing volatility.

According to Du Bingqin, U.S. crude inventories have declined for multiple consecutive weeks and are below both last year's levels and the five-year average, indicating generally low global onshore crude stocks. The period from June to August marks the peak consumption season abroad, and continued inventory drawdowns are likely to spur concentrated restocking demand downstream. Domestically, the rapid retreat in oil prices has helped restore refinery processing margins, with operating rates expected to recover, suggesting room for a rebound in domestic demand that could support oil prices in the near term. While short-term geopolitical premiums have been largely priced out, the restoration of Middle East production capacity and normalized shipping lane operations will take time, potentially allowing oil prices to stabilize in the early third quarter. If Middle East supply recovery proceeds smoothly by the end of Q3, the global crude market could revert to a surplus, gradually pulling prices lower.

Liang Kefang, a senior fuel oil analyst at Guotai Junan Futures, analyzed that fuel oil prices may follow a pattern of initial decline followed by a rebound. Once supply through the Strait of Hormuz resumes, a significant volume of fuel oil held in floating storage at sea will flow into the spot market, with this short-term supply surge likely to weigh on prices. After the market fully digests the supply recovery expectations, if Middle East refineries face constraints such as feedstock availability or margins, leading to a slower-than-expected production restart, the market could face another temporary supply shortfall, potentially driving a price recovery.

Du Bingqin believes that a lower crude oil price center will generally depress the absolute price levels of both high-sulfur and low-sulfur fuel oils. However, structural tightness in refined products domestically and internationally may persist in the near term, likely keeping the price spread between low-sulfur and high-sulfur fuel oils at elevated levels. From a medium- to long-term perspective, increased operating rates at Asian refineries will boost fuel oil supply, potentially allowing crack spreads to gradually return to more rational ranges. Nevertheless, in the short term, recovering shipping demand should continue to support crack spreads.

Jia Yeping summarized that, overall, the oil products market in the second half is likely to exhibit three main characteristics: geopolitical events triggering sharp, impulsive price swings; periodic shifts in strength between high-sulfur and low-sulfur fuel oils; and frequent fluctuations in crude futures term structure (contango/backwardation).

Du Bingqin advised that companies along the supply chain urgently need to establish robust risk management systems. Firms can flexibly utilize futures and options tools for two-way hedging to mitigate exposure to one-sided price risks. Simultaneously, they should diversify crude procurement channels and build a multi-sourced supply chain system, relying on strategic reserves to disperse supply disruption risks stemming from geopolitical conflicts.

Liang Kefang cautioned that companies holding physical inventories or with long-term supply contracts need to focus on guarding against the risks of inventory devaluation and profit compression from potential oil price declines in the second half, recommending proactive use of derivative markets to manage these risks.

Jia Yeping added that key risks in the outlook are concentrated in two dimensions: on the supply side, monitoring the pace of production resumption in Middle Eastern oil-producing nations and the efficiency of shipping lane restoration in the Strait of Hormuz; on the demand side, tracking the pace of global crude stockpile replenishment and the strength of fuel consumption recovery during the peak season.

It is noted that reopening the Strait of Hormuz was a key U.S. condition in negotiations with Iran, given the waterway's critical importance to global energy markets. Prior to the U.S.-Iran conflict, approximately one-fifth of the world's oil and liquefied natural gas supplies transited through this strait.

Currently, with the resumption of hostilities between the U.S. and Iran, the prospects for a full reopening of the Strait of Hormuz have become more uncertain, adding further unpredictability to the trajectory of international oil prices.