On February 28, U.S.-Israeli strikes were followed by the closure of the Strait of Hormuz, disrupting nearly a fifth of global oil flows, according to Reuters. The shock split oil prices by delivery horizon. In March 2026, futures traded around $120 a barrel while cash crude changed hands well above $170, according to Goldman Sachs.
By October, the physical crude market was loosening while the futures curve sat near a six-month high, Aephel reported. The oil price divergence is a clash between immediate availability and a financial contract tied to a later delivery. Those prices answer related, but different, questions.
Hormuz made prompt barrels scarce
A cash or spot price reflects oil available for near-term delivery. A futures price is for delivery at a later date and reflects market expectations and the costs and risks of holding exposure over time. When a disruption makes prompt barrels scarce, buyers needing oil now can bid up cash prices even as futures remain lower.
That is the mechanism identified by the Federal Reserve. Its analysis of oil futures during geopolitical conflict says the abrupt supply reduction caused by the Hormuz closure sent spot prices well above futures. The immediate market was pricing the difficulty of obtaining oil; futures were pricing contracts for later delivery.
In March, the cash-futures gap reached roughly $50 a barrel. It was direct evidence that the price of prompt crude could diverge sharply from a benchmark contract. It did not mean the futures market had no information, or that one price could replace the other in every trading decision.
The cease-fire changed the price of future risk
After an April cease-fire, a premium tied to possible further damage to infrastructure, production, refining and gas production was removed from the market, according to Goldman Sachs. That reported change concerned future risk. It did not itself restore the supply of prompt barrels disrupted by the conflict.
The Federal Reserve offers another reason futures may not move in step with spot prices. Its empirical analysis says oil risk premiums were likely negative from March, in part because investors could use long futures positions as a hedge against near-term macroeconomic risk. In that account, futures pricing reflected more than expectations for oil supply and demand.
A second mechanism is the convenience yield: the value of having a physical barrel available now. When prompt supply tightens, that value can rise, lifting spot prices relative to futures. A benchmark can therefore signal one set of expectations while a buyer’s cost of securing oil today reflects a much tighter market.
Physical prices offered the clearest wartime supply signal
The March prices illustrate the distinction. Cash crude above $170 and futures near $120 showed how far the price of immediate availability had moved from a financial benchmark. The Center for Strategic and International Studies argues that physical prices are generally the better gauge of changing supply-demand balances during extraordinary circumstances.
That is a claim about what the prices measure, not a declaration that futures are useless. Futures remain tradable references for future delivery and risk transfer. Physical prices, especially in a disruption, can better show what buyers must pay to secure barrels in the near term.
Options data need similar care. Volatility skew compares the implied volatility of options at different strike prices. The Oxford Institute for Energy Studies notes that oil’s skew is nearly always negative because hedging demand is typically dominated by producers buying put options. That established pattern does not, by itself, show that the March cash-futures gap distorted the skew or identify which side of the market drove the divergence.
Basis risk could reshape producer hedging
The practical exposure is basis risk: the difference between the price a producer receives for its actual crude and the benchmark used to hedge it. Standard futures contracts can reduce broad price exposure while leaving a producer exposed if its crude, location or delivery timing trades at a very different price. The March gap makes that mismatch visible; it does not prove that the gap will persist.
My forecast is that, over the next 18 months, some major producers will seek more tailored hedges for delivery-specific or physical-price exposure if large benchmark-to-cash gaps recur. This is a conditional prediction, not a reported industry shift. The incentive is straightforward: a hedge that tracks a producer’s realized price more closely can reduce the residual exposure left by a standard contract.
The second-order effect would be greater value in reliable information about location, timing and deliverability. A trader with access to physical flows may be better able to assess whether an apparent price gap can be acted on than a financial investor looking only at benchmark prices. That advantage depends on actual logistics and market access; it does not make arbitrage automatic or exclusive to any one class of firm.
The forecast would weaken if physical prices return to sustained alignment with futures, or if standard contracts track producers’ realized prices through later disruptions. The ledger supports a sharp divergence during the 2026 shock; it does not establish that bespoke instruments or high-frequency trading have already taken over the market.
October activity data and the futures curve tell different stories
October’s composite purchasing managers’ index readings offer macroeconomic context, not a direct explanation for March’s price gap. The U.S. composite PMI slipped to 57.6, its second-strongest expansion since March 2022, while the eurozone measure fell to 51.9, according to FXCM’s October briefing. Both still indicated expansion, though activity cooled.
Those readings can inform expectations for future demand. They cannot measure the cost of a prompt cargo during a supply disruption. The oil price divergence showed that benchmark exposure and physical delivery can carry different risks; for hedgers, the price that matters depends on which one they need to manage.
