Dubai: Base Oil Markets React to Rising Geopolitical Tensions
Base oil prices continued to edge higher on Monday, following a brief spike driven by renewed tensions between Israel and Iran. The escalation raised growing concerns over potential disruptions to crude supply—critical for base oil production.
The market saw a sudden spike as traders assessed the possible impact on feedstock availability and lubricant supply chains. At one stage, Brent crude reached $81.40 per barrel, while U.S. benchmark crude touched $78.40—levels not seen since January. Although prices eased slightly by midday, the session still closed with gains of around 1%.
For lubricant manufacturers and buyers, these developments signal continued pricing pressure and market instability across the base oil sector.
What Caused the Spike in Base Oil Market Volatility?
The sudden spike in base oil prices came after a weekend of central geopolitical tension. Military strikes targeting Iran’s strategic infrastructure—including regions near its energy production sites—sparked global concern. As one of OPEC’s top base oil feedstock producers, any potential disruption to Iran’s output can significantly impact global supply chains.
Market uncertainty increased as Iran warned of an expanded response, creating fears of wider instability in the region. These developments led to a surge in crude prices, which directly affects base oil costs and, in turn, the pricing of finished lubricants.
Why UAE Residents Should Care
In the UAE, lubricant prices are closely tied to global base oil trends, which are influenced by geopolitical shifts and fluctuations in the crude oil market. Although the local supply chain remains stable, international price fluctuations can directly impact the cost of lubricant production, blending, and distribution.
While there’s no immediate disruption in supply, ongoing regional tensions keep base oil markets on edge. This uncertainty can lead to pricing volatility—impacting procurement strategies for automotive, industrial, and commercial lubricant users across the UAE. According to a Gulf News report, the Israel-Iran conflict could increase global costs for fuel, food, and other essential goods—further adding pressure on energy-dependent sectors, including lubricant manufacturing and distribution.
Why Base Oil Prices Didn’t Climb Further
Despite heightened geopolitical tensions, base oil prices didn’t surge uncontrollably—mainly because actual supply chains have not yet been disrupted.
“The geopolitical risk premium is softening, as no physical supply interruptions have occurred so far,” noted Giovanni Staunovo, an energy analyst at UBS. “Still, with uncertainty around how the situation may unfold, the base oil market is expected to remain volatile in the short term.”
Charu Chanana, Chief Investment Strategist at Saxo Bank, added, “While the initial price spike eased, underlying pressure remains across the global lubricant supply chain. Even without a direct disruption, rising transport costs and insurance premiums could push base oil and additive prices higher for an extended period.”
For lubricant manufacturers and buyers, this means staying alert—especially as small shifts in upstream costs can quickly impact blending and distribution pricing down the line.
Strait of Hormuz: A Critical Route for Base Oil Supply
At the center of current market concerns is the Strait of Hormuz—a vital maritime corridor between Iran and Oman that handles around 20% of the world’s crude oil shipments. Since crude is the primary feedstock for base oil production, any disruption in this route could lead to sharp increases in base oil and finished lubricant prices.
If tanker traffic is delayed or restricted, even temporarily, lubricant manufacturers’ supply chains could face delays, and procurement costs may rise rapidly. According to Goldman Sachs, a partial halt in crude flow through the Strait for just one month could drive Brent prices to $110 per barrel—adding significant cost pressure across the lubricant industry [source].
However, a complete blockade remains unlikely, as Iran also relies on this shipping lane to export its oil, which is key to its economy and its base oil trade.
“All attention is focused on the Strait of Hormuz and whether Iran might attempt to disrupt tanker movement,” said Ole Hansen, Head of Commodity Strategy at Saxo Bank. Even the threat of disruption could delay shipments, increase freight costs, and push base oil prices sharply higher in the short term.
What Could Drive Base Oil Prices Higher?
Base oil prices could surge again if:
- Iran escalates beyond verbal warnings and takes military action impacting crude infrastructure.
- Tanker movement through the Strait of Hormuz is delayed, affecting base oil feedstock shipments.
- The conflict spreads to other key crude supply routes or oil-producing nations.
For now, the lubricant market remains highly volatile, with base oil pricing reacting sharply to geopolitical headlines, shipping risks, and diplomatic developments. Lubricant buyers and manufacturers should remain vigilant, as even minor disruptions in crude logistics can have a ripple effect throughout the global supply chain.
Bottom Line
Base oil prices haven’t spiked dramatically—yet—but market sentiment remains highly uncertain. For lubricant buyers and businesses in the UAE, it’s essential to monitor global developments, particularly around key crude supply routes like the Strait of Hormuz, even if domestic base oil availability remains stable for now.
Price volatility may be the new normal, with fluctuations likely to continue affecting lubricant procurement and blending costs in the near term.
Editor-at-Large
A passionate writer in the lubricant industry, Awais Iqbal has been covering oils, greases, and industrial fluids since the start of his career. At 25, he’s already written for blogs, catalogs, and brand guides across the UAE. Awais’s insights help companies connect with their audience, and his clear, helpful writing style is trusted by brands in the region.
