25th October 2026
When we discuss rising oil prices, we tend to concentrate on Brent crude because it is the familiar international benchmark. But Brent is only one part of a much larger market. The price of oil depends on where it comes from, what sort of oil it is, where it is going, whether refineries can process it, and how much it costs to insure and transport it.
Wars in the Middle East and Ukraine can affect several of these factors simultaneously. That is why the consequences can reach far beyond the price displayed on an oil-market chart.
The important point is that the cost of getting energy to the customer can rise even when the underlying price of crude oil barely moves. Shipping, insurance, refinery capacity, exchange rates and the availability of particular fuels all matter.
For Britain, the effects can appear at the petrol pump, in diesel prices, heating-oil bills, electricity costs, supermarket prices and the cost of running a business. For countries that depend heavily on imported energy, food and manufactured goods, the consequences can be even more severe.
1. There is more than one oil price
The oil market is not a single market with one worldwide price. Different grades of crude oil and different finished fuels can move at very different rates.
Brent crude — the European and international reference
Brent is particularly important to Britain because it reflects the market for North Sea oil and helps set prices for many other supplies. It can rise sharply when European buyers compete for alternative supplies during a Middle East disruption.
West Texas Intermediate (WTI) — the American benchmark
WTI reflects the US market, where domestic production, stocks and export capacity have a strong influence. It can rise less than Brent when American supplies are plentiful, even during the same international crisis.
Brent tops $85 for first time since 2024 on Mideast tensions
Dubai and Oman crude — particularly important in Asia
These benchmarks are important for Middle Eastern oil sold to Asian refiners. Disruption around the Strait of Hormuz can hit these markets particularly hard because so much Gulf oil normally travels through this route.
Diesel, petrol, jet fuel and heating oil — the prices consumers actually feel
These are refined products, not crude oil. Their prices depend on the cost of crude, refinery capacity, stocks of the particular fuel, demand and transport costs. Diesel and aviation fuel can become much more expensive than crude oil alone would suggest.
The distinctions are important. The US Energy Information Administration explains that the differences between crude benchmarks reflect not only quality, but also location, transport costs and regional supply and demand.
2. What is happening to these markets now?
The International Energy Agency's October 2026 oil market report describes a market under considerable strain. Its figures show why watching Brent alone can miss some of the most serious developments.
North Sea Dated crude
$116.89
Per barrel average in September
Brent futures
$107
Around the time of the report
Gulf-to-Asia tanker cost
$37+
Per barrel by mid-October
Global oil stocks
509m Barrels below end-February levels
One particularly revealing comparison is that North Sea Dated crude, a measure of physical oil available for delivery, rose much more sharply than Brent futures. By the time of the IEA's report, some physical North Sea grades were trading as high as $160 a barrel, while Brent futures were around $107.
Why the difference? Futures prices reflect expectations of what oil will be worth at a specified future date. Physical prices reflect the immediate struggle to secure oil for delivery. When supplies are tight, a buyer who needs oil now may have to pay a substantial premium.
This is a warning that the immediate cost of obtaining oil can rise much faster than the headline market price suggests.
There is another important development: diesel has been hit particularly hard. The IEA reports that disruption to exports from Russia and the Middle East has left global diesel supplies severely constrained. Diesel prices have approached levels equivalent to twice the price of crude oil, reflecting the additional pressure on refined fuel markets.
That matters because diesel is essential to road haulage, agriculture, construction, mining and much of the world's freight transport.
3. Why shipping has become such a big part of the problem
This is arguably the most important part of the story, because it helps explain why the economic damage can continue even if oil production begins to recover.
The IEA's analysis published on 21 October found that shipping crude from the Middle East Gulf to Asia on a large tanker cost more than $37 per barrel by mid-October, over five times the pre-war level. Shipping US crude to Asia had also become extraordinarily expensive.
Very Large Crude Carrier in Ocean
Brent crude slips below $90 on peace hopes; outlook remains fragile — TradingView News
Several factors explain the increase.
Dangerous sea routes. Attacks and threats around the Strait of Hormuz and Red Sea have made some routes much riskier.
War-risk insurance. Shipowners and cargo owners face additional premiums, sometimes running into millions of dollars for a voyage.
Longer journeys. Vessels diverted away from dangerous waters take longer to complete their trips.
Fewer available ships. A tanker tied up for weeks on a longer voyage cannot immediately collect another cargo.
Changes in trading patterns. Oil is being moved between vessels or transported in smaller shipments to work around restrictions.
The consequences extend beyond the price of hiring a ship. A refinery may have to pay more for the oil it buys, more to transport it and more to insure the cargo. If its profit margin disappears, it may reduce production, making diesel and other fuels scarcer and more expensive.
The IEA reports that some Asian refiners processing Middle Eastern crude were pushed into negative refining margins in September. Even US crude, which might otherwise provide an alternative, has become expensive to ship to Asia.
There is a further complication: the same ships and shipping capacity are needed to transport finished products such as diesel and jet fuel. Disruption to crude transport can therefore feed into a second round of costs after the oil has been refined.
4. How does this affect Britain?
The UK is exposed through several different routes. The price of crude oil is only the starting point.
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Petrol and diesel
The latest complete official monthly figures available from the Office for National Statistics show that in September 2026, average petrol reached 169.5p a litre and diesel 192.5p. Petrol rose by 8.2p and diesel by 10.7p in just one month. Motor fuel prices were 29.8% higher than a year earlier.
Diesel is particularly important because the cost of moving goods can rise even for businesses that do not use much energy directly.
Global Energy Shock Guide for UK Homeowners — Simple Solar Ltd.
Heating oil and household energy
Households using heating oil can feel international price changes quickly because their fuel is bought in a competitive market and is not protected by the domestic gas and electricity price cap. Scotland's October economic bulletin reported that domestic heating-oil prices were 64.6% higher year on year in August.
Gas and electricity prices also face pressure, although the effect reaches household bills through different mechanisms and on different timetables.
Food, supermarkets and everyday goods
Food travels from farms to processors, warehouses and shops. Tractors, harvesting machinery, refrigeration, packaging and delivery all consume energy or depend on energy-intensive materials.
Higher diesel and freight costs can therefore increase the price of bread, meat, vegetables, clothing, building materials and many imported products, even when the product itself contains no oil.
Businesses, investment and employment
Hauliers, farmers, builders and manufacturers may find their costs rising faster than they can increase their prices. Some absorb the increase through lower profits; others pass it on, reduce investment or postpone recruitment.
Smaller businesses often have less financial room to withstand a prolonged period of high fuel, electricity and transport bills.
The wider economic danger
Higher oil and shipping costs create a double squeeze on the economy.
First, households have less money left after paying for fuel, heating, food and other essentials. They may cut back on eating out, shopping and leisure.
Second, businesses face higher costs and weaker demand. They may increase prices, accept lower profits or employ fewer people.
That combination can push inflation higher while slowing economic growth. It also makes life more difficult for the Bank of England: cutting interest rates to support a weakening economy becomes harder if energy costs are pushing inflation upwards. The House of Commons Library has highlighted these risks in its assessment of the Middle East conflict.
For the Treasury, higher fuel prices can increase VAT receipts, but that is not a free economic gain. Households are paying more for the same fuel, while weaker spending and slower growth can damage tax revenues elsewhere.
5. The effects on the rest of the world can be even greater
The impact is uneven because countries differ in their energy supplies, refining capacity, currencies and ability to subsidise essential goods.
Region
Main vulnerability
Asia
Heavy dependence on Middle Eastern crude and exposure to the highest tanker costs on Gulf-to-Asia routes.
Europe
Competition for alternative crude, diesel and jet fuel, alongside higher transport and insurance costs.
United States
Domestic oil production provides some protection, but fuel prices are still affected by global markets and exports.
Oil-importing developing countries
Expensive fuel, weaker currencies and limited public finances can make energy and food imports much harder to afford.
Oil-exporting countries
Higher prices may increase revenue, but disrupted exports, expensive shipping and damaged infrastructure can offset the benefits.
The effects on poorer importing countries deserve particular attention. A wealthy country can sometimes borrow money, reduce taxes temporarily or subsidise fuel. A poorer country may have to choose between paying more for imports, allowing prices to rise sharply or diverting public money away from health, education and infrastructure.
Food security can also suffer. Oil and gas are important to farming, transport and fertiliser production. Disruptions to energy exports and higher freight costs can make agricultural inputs more expensive, with consequences that may appear in food prices months later.
Meanwhile, higher shipping costs can alter where goods are manufactured and where they are sold. Some producers may abandon distant markets, while others may seek alternative suppliers. These adjustments take time and can leave businesses with shortages, delayed deliveries or higher stockholding costs.
6. Why prices may stay high even after the fighting eases
It is tempting to assume that a ceasefire would quickly return oil and fuel prices to normal. It might bring some relief, but the recovery could be slower than the initial price rises.
Several problems would remain:
Oil inventories have been depleted and would need rebuilding.
Tankers and crews would need to return to normal routes.
Insurance premiums might remain elevated until shipping companies consider the risks manageable.
Refineries would need reliable supplies of suitable crude.
Exporters and importers would have to reorganise disrupted contracts and trade routes.
The IEA's October outlook warns that constrained supplies of diesel and other middle distillates could persist well into 2027. It also cautions that even an improvement in security conditions may not immediately resolve shipping bottlenecks.
There is a counterargument, however. If high prices cause consumers and businesses to cut their use of oil, demand will fall. Additional production, the release of stored supplies and the reopening of trade routes could eventually bring prices down. The market is not destined to rise indefinitely.
The danger is that supply disruptions and high costs persist long enough to weaken the economy before that adjustment takes place.
The key lesson for the UK
Brent remains a useful indicator, but it is no longer enough to watch one crude-oil figure and assume it tells the whole story.
The more revealing picture comes from following several indicators together:
Brent and physical North Sea crude prices — the cost of obtaining oil.
WTI and Dubai/Oman prices — whether regional markets are moving differently.
Diesel and jet fuel prices — the pressure on transport, industry and aviation.
Heating oil and wholesale natural gas — the risks facing households and businesses.
Tanker freight rates and war-risk insurance — the extra cost of moving energy.
Fuel prices, inflation and business activity in the UK — the extent to which international pressures are reaching the wider economy.
The most worrying combination is not simply expensive crude. It is expensive crude, scarce diesel, costly shipping and falling inventories occurring together.
That combination can turn a geopolitical crisis into a broader cost-of-living and economic-growth problem. Even if oil prices eventually retreat, the higher costs already incurred by households, businesses and governments will not necessarily disappear at the same speed.
For Britain, and particularly for rural communities where people depend on cars and some households rely on heating oil, the impact can be more pronounced than national averages suggest. The real issue is not just what a barrel of oil costs today, but how much it costs to turn that barrel into usable fuel and deliver it to the people who need it.