Oil Price War Breaks Out as Brent Crashes 17% and Gulf Producers Slash Prices

Oil prices have fallen off a cliff. In a single week, the global benchmark Brent crude dropped by more than 17% to around $97 a barrel — its steepest weekly fall since the 2020 pandemic. And the world’s biggest oil producers are not cutting output to defend prices. Instead, they are cutting prices to fight for buyers.

Saudi Arabia, the world’s largest oil exporter, has slashed the price of its flagship Arab Light crude for Asian customers to the deepest discount in more than six years. Other Gulf producers are doing the same. After a year in which war in the Middle East pushed oil prices up and squeezed supplies, the market has flipped. The problem now is not too little oil. It is too much.

This is what an oil glut looks like — and it could mean cheaper fuel, lower inflation and some relief for oil-importing countries, including Pakistan, in the months ahead.

Brent crude falls 17% in a week

The scale of the fall is striking. Brent crude, the benchmark used to price most of the world’s oil, tumbled more than 17% last week to around $97 a barrel, according to Reuters. It was the sharpest weekly decline since the early days of the Covid-19 pandemic in 2020, when lockdowns wiped out demand almost overnight.

The trigger was political. The slump followed the heavy defeat of US President Donald Trump’s Republican Party in the midterm elections, which raised expectations in the market that Washington could move quickly to de-escalate the war with Iran that has disrupted energy markets since 28 February 2026. Traders bet that a ceasefire, or at least a calmer phase in the conflict, would let oil flow more freely — and prices fell accordingly.

But the fall is about more than one election result. Even if Washington and Tehran do not reach a lasting peace deal in the coming weeks, the market already faces a surplus of crude, Reuters reported. Supply has recovered faster than demand, and producers are now competing with each other for a shrinking pool of buyers.

Oil is flowing through Hormuz again

The heart of the story is the Strait of Hormuz, the narrow waterway between Iran and Oman through which about a fifth of the world’s oil normally passes. When the war on Iran began in late February, flows through the strait almost stopped. In the first month of the war, crude exports through Hormuz fell to virtually zero, excluding Iranian shipments.

That has now changed dramatically. Oil exports through the strait averaged 10.3 million barrels per day in October, according to data from analytics firm Kpler cited by Reuters. That is still below the pre-war average of 13.5 million barrels a day, but it is a sharp recovery from the near-total shutdown earlier in the year. Gulf producers have been able to move tankers through the waterway again using convoys protected by the US Navy.

When alternative export routes are included — through Saudi Arabia’s Red Sea port of Yanbu and the United Arab Emirates’ Fujairah terminal — total regional crude exports reached 16.6 million barrels a day in October, just short of the pre-war average of 17 million, Kpler data showed.

At the same time, producers outside the Middle East have raised output in response to the wartime supply shock, particularly in the United States, Brazil and Canada. Global crude production reached 85 million barrels a day in October, according to consultancy Energy Aspects — not only the highest since the war began, but above the five-year average of 83 million barrels a day.

In plain terms, the world is producing more oil than it can use.

Saudi Arabia cuts prices to the lowest since 2020

When there is too much of something and not enough buyers, sellers cut prices. That is exactly what is happening in the Gulf.

Saudi Aramco, the state oil giant, cut the December price of its Arab Light crude for Asian customers by $2 a barrel compared with November, setting it at $6.50 a barrel below the Oman/Dubai benchmark average. That is the lowest level since May 2020, during the pandemic, according to Reuters. Aramco also cut December prices across all grades for Northwest Europe and the Mediterranean by $1 a barrel, while keeping prices for the United States unchanged.

The discount has widened fast. Arab Light for Asia was priced $2 below the Oman/Dubai average in October, $5 below in November and $6.50 below for December. In other words, Saudi Arabia is now offering its oil at a much steeper discount than it was just two months ago, in order to keep its crude attractive to Asian refiners.

Other price signals point the same way. The premium of Oman’s crude over the Dubai benchmark collapsed from $34 a barrel in mid-September to just 95 cents last Tuesday — its weakest since July — before recovering slightly to $1.76 on Thursday, Reuters data showed. Spot premiums for Middle Eastern benchmark crudes have returned to the levels seen before the war.

HSBC has also raised its forecast for Saudi Arabia’s crude output in the fourth quarter of this year, from 6.3 million barrels a day to 8.3 million, citing a faster-than-expected recovery in exports. The message is clear: Riyadh has its volumes back, and it is now competing on price to place them.

Why producers cannot just store the extra oil

Normally, when supply outruns demand, producers have two options: cut production, or store the surplus until buyers return. This time, both options are difficult.

Storing oil is uneconomical at the moment. Continued uncertainty around the Middle East conflict has kept the price of oil for immediate delivery well above the price of oil for delivery in the future — a market structure known as backwardation. Paying to store a commodity today that must be sold later at a lower price makes little economic sense, so producers have little incentive to put barrels into storage.

That leaves competition for buyers as the main way to deal with the surplus — and the best way to win buyers is to lower prices.

Demand is also part of the problem. High fuel prices this year have forced many consumers to cut back, and some Asian countries have resorted to fuel rationing. JPMorgan estimates that global oil consumption has fallen by around 3.3 million barrels a day since the start of the war. At the same time, global refining capacity has shrunk this year because of damage in the Middle East and Ukrainian strikes on Russian energy infrastructure, which has reduced refiners’ ability to turn crude into petrol, diesel and other fuels. Refiners now have a wider choice of crude to buy, but they are buying less of it.

Shipping oil now costs $30 a barrel

There is another cost squeezing the market: moving the oil. Iranian attacks on vessels crossing the Strait of Hormuz continue on a near-daily basis, despite US naval escorts, according to Reuters. That has forced many producers to use expensive ship-to-ship transfers in the Gulf of Oman, and has sent tanker freight rates soaring.

Shipping costs now average around $30 a barrel, compared with roughly $5 before the war. That is a huge extra cost, and it is one reason Gulf producers are offering such steep discounts — part of the discount effectively refunds the buyer for the cost of getting the oil delivered safely.

This is also why the price war is not simply a sign of a healthy, competitive market. It is a market under stress, where producers are absorbing war-related costs and still struggling to find buyers.

What cheaper oil means for ordinary people

For most people, the first question is simple: will this make life cheaper? The honest answer is that it helps, but not immediately and not everywhere.

Cheaper crude usually feeds through to lower petrol and diesel prices over time, and lower energy costs can ease inflation across the economy — from transport and food to manufacturing. For oil-importing countries such as Pakistan, which buy most of their oil from abroad, cheaper crude can mean a smaller import bill, less pressure on foreign currency reserves and some relief for the government budget.

For oil-producing countries, the picture is the opposite. Lower prices mean less revenue for governments that depend on oil exports to fund public spending. Gulf states, Reuters noted, will have every incentive to maximise volumes and revenues as they repair the economic damage inflicted by the conflict and seek to replenish state coffers. That is one reason the price war could intensify rather than fade: if every producer tries to sell more at lower prices, the glut gets worse before it gets better.

For drivers and households in Asia, the world’s biggest oil-buying region, the Saudi discount is good news in the short term. Asian refiners are getting the cheapest Saudi crude in more than six years, which should eventually show up in lower fuel costs — provided freight costs and local taxes do not swallow the saving.

What could change the picture

The glut is not guaranteed to last. Reuters pointed to several factors that could turn the market around.

First, demand could rebound. If some of the 3.3 million barrels a day of lost consumption was delayed rather than destroyed — people driving less, factories slowing down, governments rationing fuel — then consumption could surge if prices fall far enough.

Second, damaged refineries could return to operation sooner than expected, especially if there are breakthroughs in the wars in Iran or Ukraine. More refining capacity would mean more demand for crude.

Third, the war itself could flare up again. A return to prolonged fighting in Iran could curb supply, though the White House will almost certainly want to avoid this. On the other hand, a durable settlement between the US and Iran that restores normal passage through Hormuz would likely slash freight and security costs and allow Gulf producers to move even more crude onto a market where the US, Brazil, Canada and other suppliers have already boosted output.

That is the paradox at the centre of this story. The war created an extraordinary energy shortage. The end of the war could create a market with more crude than producers know what to do with.

Why this matters

The oil market has gone through a complete reversal in less than a year. In February, the fear was that war would cut off the world’s most important oil chokepoint and send prices soaring. By November, the fear is the opposite: that too much oil, too few buyers and too little refining capacity will push prices down and trigger a price war among the world’s biggest producers.

For Pakistan and other oil importers, that is welcome news after a year of high energy costs. For the Gulf’s oil exporters, it is a warning that the era of war-driven high prices is over, and that the new market will be far more crowded and competitive.

As Reuters columnist Ron Bousso put it: “The old energy market is gone, and the new one is going to be far more crowded.”

What happens next

Three things are worth watching in the coming weeks.

First, the December official selling prices from other Gulf producers. If they follow Aramco with deeper discounts of their own, the price war is on in earnest.

Second, the US-Iran talks. Any sign of a durable deal — or a return to fighting — will move oil prices sharply in either direction. President Trump has said new strikes on Iran are “highly unlikely” if talks make progress, but three US aircraft carriers remain in the region.

Third, demand data from Asia. If Chinese and Indian refiners start buying more at these discounted prices, the glut could clear faster than expected. If they do not, prices could fall further — and the discounts could get deeper still.

For now, the world’s oil producers are in a race to the bottom on price. The winners, for once, may be the people who buy the oil rather than the people who sell it.

FAQ

What is Brent crude?

Brent crude is the global benchmark price for oil. It is based on crude produced in the North Sea, and most of the world’s oil is priced against it. When Brent falls, oil prices generally fall around the world.

How much has the oil price fallen?

Brent crude fell by more than 17% in a single week to around $97 a barrel, according to Reuters. That was its steepest weekly fall since the 2020 pandemic.

What did Saudi Arabia do?

Saudi Aramco cut the December price of its Arab Light crude for Asian customers by $2 a barrel, to $6.50 below the Oman/Dubai benchmark — the lowest level since May 2020. It also cut prices for Europe by $1 a barrel and left US prices unchanged.

What is the Strait of Hormuz?

It is the narrow waterway between Iran and Oman through which about a fifth of the world’s seaborne oil normally passes. Flows through the strait almost stopped when the war began in February 2026, but had recovered to an average of 10.3 million barrels a day by October, according to Kpler data.

Will petrol get cheaper in Pakistan?

Cheaper crude usually helps over time, but pump prices also depend on taxes, the rupee-dollar exchange rate, refining margins and freight costs. A fall in Brent does not automatically mean an equal fall at the petrol station.

What is backwardation?

It is a market situation where oil for immediate delivery costs more than oil for delivery in the future. It makes storing oil uneconomical, because you would pay to store something you must later sell for less.

Conclusion

The Middle East oil market has flipped from shortage to surplus in a matter of months. Brent crude has crashed by more than 17% in a week, Saudi Arabia is offering its oil at the deepest discount in six years, and tankers are once again moving through the Strait of Hormuz in large numbers. The world is producing around 85 million barrels of oil a day — more than it can use — and producers are cutting prices to compete for buyers.

Whether this turns into a lasting period of cheap oil depends on the war, the peace talks and Asian demand. But one thing is already clear: the energy crisis that defined much of 2026 is giving way to a very different problem — a glut. For oil-importing countries and ordinary consumers, that is the best energy news in a long time.

Sources

• Reuters: “Middle East oil price war heralds post-conflict glut” — https://www.reuters.com/commentary/reuters-open-interest/middle-east-oil-price-war-heralds-post-conflict-glut-2026-11-09/
• BOE Report (Reuters): “Saudi Arabia cuts December Asia oil prices to fresh 6-year low” — https://boereport.com/2026/11/05/saudi-arabia-cuts-december-asia-oil-prices-to-fresh-6-year-low/
• Maaal: “Saudi Arabia Lowers Oil Prices for Asia in December to Lowest Level in 6 Years” — https://maaal.com/en/news/details/saudi-arabia-lowers-oil-p/

This article is for general information and education only. It is not legal or financial advice.