On Friday (September 18), Saudi Arabia's old lifeline bypassing the Hormuz was disrupted, and European customers' Saudi crude oil quotas for next month were completely cancelled. However, oil prices actually fell from the week's high and remained above $100: the supply disruption is real, and the expectation of a recovery is also real. The market is swinging back and forth between the two truths, and no one dares to make any definitive statements.

Next month, Europe won't get a single ton of Saudi crude oil.

Those holding European cargo positions felt the pain first today. Saudi Aramco directly notified its European customers that all October crude oil quotas were suspended due to damage to the East-West pipeline. With this export route bypassing Hormuz cut off, Egyptian ports couldn't receive cargo. Refineries were forced to scramble for North Sea cargo, keeping diesel crack spreads high. In short: the slight drop in futures prices hasn't even reflected the tightness in the spot market.

The supply disruption is real, so why are oil prices still falling?

Many traders are asking the same question today: Why are prices still falling even though supplies are cut off? The market is pricing in a "recovery" scenario—pipelines restoring half their capacity within days, ship-to-ship transfers filling the gap, and panic receding. But prices have remained above $100, indicating that few truly believe this scenario will unfold smoothly. This means the progress of the recovery is reflected in market sentiment; any misstep will trigger a return of the risks underestimated in the morning.

Gold isn't falling along with oil prices; it's watching something else.

Oil prices have fallen, and safe-haven demand should logically be cooling, yet gold has hit a one-week high. This divergence isn't contradictory, but rather a division of labor: oil prices reflect a partial recovery in supply, while gold reflects an ongoing situation. Traffic in the Strait of Hormuz remains below pre-war levels, and clashes in the Red Sea and along the border continue; funds focused on precious metals are more patient than those chasing rising oil prices.

A 5% yield on US Treasury bonds is just one step away from triggering traders' heart rate.

Energy prices, along with diesel and electricity prices, are influencing inflation expectations. Major overseas institutions have begun to revise their interest rate hike paths upward, and the 10-year US Treasury yield is approaching the psychological threshold of 5%. This trend is intertwined with oil prices today—the market's real concern isn't about any particular news item, but rather that oil costs are becoming the "core" of inflation. Interest rates and commodities need to be monitored together.

What should we keep an eye on, and what should we guard against?

If pipeline capacity recovery proceeds smoothly over the weekend without new disruptions, Monday's Asian trading session will likely see a further reduction in the panic premium. However, the $100 level won't be easily relinquished, and any negative news will likely trigger a renewed buying spree. If new supply uncertainties emerge over the weekend, Monday could see a gap down, with commodities like diesel and gold, which are closely tied to supply, likely to move first. In the medium term, the focus is on the spot market's pace and shipping capacity: if the structural diesel shortage continues into next year, inflation expectations and Treasury yields will rise layer by layer, making safe-haven buying of precious metals difficult to dissipate in the short term. If diplomatic tensions ease and shipping volumes return to pre-war levels, oil prices will shift downwards, but the inflationary pressure is already in place, and interest rates may not necessarily ease in tandem.

[Further Reading]

The pipeline is supposed to be half-restored in a few days, so why is the spot market still so tight? Restoring production capacity and refining receiving goods are two different things. Quotas will end next month, and ships were booked ten days to two weeks ago; no one is filling the gap in between. Therefore, the futures market dares to fall, but the spot market doesn't dare to loosen. Oil prices have fallen, so why is gold hitting new highs? The oil price drop reflects expectations of a recovery, while gold reflects the ongoing situation. Until the Hormuz flow returns to pre-war levels, no one dares say the matter is over. What does it mean that US Treasury yields are approaching 5%? It means the market is starting to seriously price in inflation. If oil prices don't fall, yields won't come down, and the correlation between interest rates and commodities will become increasingly tight.