Gulf oil exports are nearing normal levels, yet the spot benchmark for crude is still commanding a war price, according to the latest estimates from Wall Street giant Goldman Sachs, which show exports recovering to 22 million to 23 million barrels per day, while restocking demand, refined product shortages and the risk of renewed supply disruptions are pushing Dated Brent, the spot Brent crude benchmark, rapidly toward US$120 a barrel.

At the same time, long-term US Treasury yields have surged to more than two-decade highs, as the energy shock transmits into global financing costs.

Dated Brent, written as the spot Brent crude assessment when referring to specific prices, is assessed and published by Platts, a unit of S&P Global, based on quotes and trades in the physical crude market; the word Dated emphasizes that these cargoes have fixed delivery dates, reflecting the price of near-term physical supply delivery, and differs from the Brent crude futures quotes commonly seen on news pages.

Around midday Beijing time on October 12, Brent and WTI futures were quoted at US$103.18 and US$90.31 respectively, down noticeably from early Asian session levels, with declines of about 1.47% and 1.68%.

Trump emphasized on social media an initiative for a Russia-Ukraine energy ceasefire taking effect, along with expectations of improved Russian diesel supply, but Ukraine is still waiting for details of the energy ceasefire and Russia has not yet formally confirmed it; recent major arms attacks on Saudi airports and Gulf tankers indicate the Middle East has not fully cooled.

Goldman Sachs has raised its December Brent forecast to US$90 from US$85. Based on the pre-war levels of US$72.48 and US$67.02 on February 27, the two benchmarks have risen about 45.5% and 37.9% respectively.

The pricing trajectory and reaction in the crude market at Monday's open show that some ceasefire news over the weekend has not significantly dispelled concerns about supply disruptions.

From oil barrels to long bonds: rising inflation is sharply raising the financing threshold

On October 7, the US 10-year and 30-year Treasury yields hit intraday levels of 5.368% and 5.735%, both the highest since 2002; official daily data on October 9 fell back to 5.24% and 5.60%. The UK 30-year yield surged to 6.05% on October 8, the highest since 1998.

From a pricing perspective, shortages of crude, diesel and other refined products as well as jet fuel have sharply pushed up transportation costs in the short term, increasing inflation stickiness; fiscal financing needs and policy uncertainty have raised term premiums, while AI financing demand and bond hedging sales have added further pressure. Therefore, cooling short-term rate hike expectations does not mean long-term funding costs will fall in tandem.

The repricing of US Treasuries is also transmitting to Europe and Japan through global asset allocation. On the investment side, the recovery of crude, diesel and other refined product supplies is not enough to remove the cost pressure on air transportation; for high-valuation AI-related technology stocks, persistently high rates and high US Treasury yields simultaneously reduce the present value of future cash flows and raise the threshold for expansion financing.

The reason long-term yields are unlikely to fall quickly on a single ceasefire statement is that their pricing includes both the future path of short-term rates and the term premium required for holding long-term bonds. Higher energy prices increase the risk of persistently elevated inflation, limiting room for central bank easing; fiscal financing needs and policy uncertainty raise the compensation investors demand for taking long-term risk.

The New York Fed model estimates the 10-year term premium has recently risen to about 96 basis points, a 12-year high; on October 9, the real yields on 10-year and 30-year inflation-protected Treasuries were 2.91% and 3.32%, showing that financing pressure also manifests as higher real funding costs.

The AI investment boom is reinforcing this pressure through financing markets: after buying long-term bonds of tech giants, some institutions sell Treasury futures to hedge duration, or sell Treasuries to free up investment capacity; rising rates extend the expected duration of mortgage-backed securities, triggering additional rate-hedging sales. Corporate financing and hedging transactions together may create a self-reinforcing bond selloff. Therefore, even if recent rate hike expectations have cooled, long-term bonds may still face supply and risk compensation pressure.

This pressure is also transmitting overseas. The UK 30-year government bond yield hit 6.05% on October 8, the highest since early 1998; France, beyond the global rise in rates, is additionally hit by disappointing deficit reduction, debt burden and political uncertainty, with the French 10-year yield premium over Italy rising to 30 basis points, a record since the euro was created. This also reveals an important change: a common energy shock and rising funding costs are amplifying different fiscal vulnerabilities across countries.

Undoubtedly, a credible and sustained energy ceasefire between the warring sides could improve the cost and demand environment for aviation, transport and some consumer companies, and ease the heavy US inflation pressure as well as the persistent discount pressure on the denominator side of growth stocks; but falling oil prices can only remove part of the constraints, and fiscal risk and long-term financing needs will not disappear with them.

Oil is back, but fear has not faded: Gulf exports return to normal, yet spot buyers keep paying the war price

Goldman Sachs forecasts that over the past two weeks, Persian Gulf oil exports, including covert exports, have recovered to 22 million to 23 million barrels per day, close to the 2025 average; but the war risk premium remains significant, with spot Brent crude prices staying elevated.

The core contradiction in the oil market is that exports have recovered while spot prices remain high. Restored crude flows support a gradual decline in benchmark prices, but the persistently strong premium in spot Brent indicates buyers are still scrambling to buy prompt crude at high prices to replenish depleted inventories, keeping a clear near-month backwardation at the front of the curve.

Refined products remain the tightest area; even if crude supply normalizes, diesel and jet fuel refining margins remain supported. Houthi claims over the weekend of an attack on Saudi Aramco facilities pose an immediate test: Saudi Arabia has been leading the export recovery, and any confirmed supply disruption could widen spot premiums again.

Covert exports refer to cargoes shipped after tankers turn off satellite positioning transponders, making them difficult to track. Goldman Sachs estimates such flows at about 5 million barrels per day in September, an important reason its estimate is higher than others.

Another Wall Street giant, JPMorgan, uses a more conservative method and estimates recent Gulf oil exports at about 89% of 2025 levels; most of the difference depends on how much covert fleet traffic is included.

The recovery in overseas energy supply is mainly from crude, not refined products. A late-September research report from Goldman Sachs said crude exports had already exceeded the 2025 average: Saudi exports more than doubled that month to nearly 12 million barrels per day, and the UAE was also above normal levels. Satellite data did not show Iranian seaborne crude exports. Refined products lagged noticeably, with diesel, gasoline and jet fuel exports at only half of normal levels. Goldman Sachs attributed this to more regional refinery shutdowns and higher risks for smaller product tankers carrying more flammable cargoes.

Spot prices and flow data present different pictures. Dated Brent, which reflects the price of North Sea crude loaded on specified dates, recently approached US$120 per barrel, clearly above futures. Goldman Sachs believes the gap stems from concerns that conflict escalation could damage long-term capacity, and from global oil inventories excluding OECD commercial stocks falling to record lows, prompting buyers to accelerate restocking. The bank estimates the risk premium in Brent spreads averaged US$22 per barrel in September, the second-highest monthly level on record, exceeding the peak during the 2022 Russia-Ukraine war.

Goldman Sachs has raised its December Brent forecast to US$90 from US$85, though it cut its 2027 baseline forecast to US$80, while warning that renewed conflict escalation could drive oil prices sharply higher. Houthi claims over the weekend of an attack on Saudi Aramco facilities direct risk straight at Saudi crude, which has led the supply recovery.

Dated Brent refers to the spot price of North Sea physical crude loaded on specified dates, different from near-month futures contracts. In early April, its premium to futures once exceeded US$25 per barrel; normally this spread is very small.