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By Alex Kimani - Oct 28, 2026, 7:00 PM CDT Middle East nations are intensifying diplomatic efforts to ease tensions with Iran, but Standard Chartered expects oil prices to remain elevated until Gulf shipping and production fully recover. Depleted strategic oil reserves could keep prices high, as governments replenish emergency stockpiles, adding fresh demand even if Middle Eastern supplies recover. European natural gas prices are approaching €100/MWh, with rising winter demand, declining storage levels and continued LNG shortages threatening further price increases.
Middle East nations have renewed their diplomatic efforts, with high-level delegations from Saudi Arabia, Turkey and Pakistan having met with Iranian officials in Tehran on Monday to explore a regional security framework in a bid to de-escalate tensions. Whereas Iranian President Pezeshkian has expressed a willingness to resolve regional differences, Tehran continues to insist that U.S. sanctions and the blockade of Iranian ports must be addressed before broader negotiations can get underway. Standard Chartered expects a legitimate agreement to knock some of the geopolitical risk premium off oil quickly, though prices will stay high until shipping lanes are secure and Gulf supply is reliable again.
Even as Saudi and Iranian officials were meeting in Tehran, the Houthis claimed fresh attacks on Saudi Arabia’s East-West pipeline pumping stations, although there is not yet verified evidence of new damage to the pipeline, or interruption of flow. Given this backdrop, Stanchart predicts that crude prices will remain elevated over the coming months, with the pace and durability of Gulf supply recovery the principal drivers of market balances. They note that the restoration of some crude exports has eased the immediate shortage, but disrupted production, constrained refining activity and costly shipping alternatives continue to limit effective supply.
Refined products carry the most risk, with diesel shortages and freight costs feeding inflation well beyond the crude market. Diplomacy can shave off the risk premium; a lasting fall in prices needs tankers moving safely through the Gulf and Gulf barrels back on the market. Strategic stock releases and rerouted trade are covering part of the shortfall for now, and neither can replace lost supply indefinitely.
Governments have drained their emergency oil stocks to cover the shortfall, and refilling them will add to oil demand in the months ahead. The U.S. Strategic Petroleum Reserve holds just 282.7 million barrels, its lowest level since 1982, according to the latest Energy Information Administration (EIA) figures.
Major Asian importers have also drawn down strategic and commercial stocks to make up for lost Gulf supply. Standard Chartered expects the refill to soak up a sizable share of returning barrels, especially if governments start buying before Gulf production and shipping are back to normal. That would leave less oil to rebuild commercial inventories and hold prices up even as tensions ease.
On the natural gas front, Stanchart has reiterated its previous projections for a high price floor for European gas through winter as seasonally normal temperatures have already tightened Europe’s physical balance enough to push prices closer to €100/MWh, with TFF gas trading at €98.58/MWh on Wednesday. Europe’s transition to the winter withdrawal period looks to have arrived. CNWE heating-related LDC demand rose by around 42% w/w, while net storage injections dropped sharply by 71%.
The region recorded its first two net-withdrawal days of the season on 20 and 21 October, although the balance remained modestly net-injecting across the week as a whole. Europe is now burning gas faster than it is storing it, as heating demand climbs and injections collapse. The squeeze has come without a cold snap.
Temperatures have been broadly seasonal and are forecast to stay that way, and still both day-ahead and front-month TTF have climbed toward €100/MWh, with continental northwest Europe already drawing intermittently from storage. Standard Chartered says the market has priced in a mild winter, and that prices have room to rise even if temperatures stay normal. Europe is in a better position to compete for LNG.
The discount on second-month TTF to Asia’s JKM narrowed to $1.08/mmBtu on October 26, from a wider gap earlier in the month, which lets Europe bid for flexible U.S. and Atlantic Basin cargoes just as heating demand rises and storage turns to withdrawals. Standard Chartered says TTF’s widening premium to Henry Hub gives U.S. exporters more reason to ship to Europe. The bank wants to see that advantage hold before counting it as extra supply.
Gulf LNG exports are still disrupted and Asian buyers face the same squeeze, so Europe and Asia are bidding for a limited pool of cargoes. Europe will likely need TTF to keep pace with JKM, or outrun it, to secure enough cargoes through winter. The narrower spread gets suppliers’ attention, and Europe needs those cargoes to keep arriving to make up for thinner storage.
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