Newsletter · 2026-09-11 · Ashutosh Agarwal

Oil War Reignites as US Sinks Five Iranian Tankers and Diesel Nears Six Dollars - Oil: OPEC+, Shale & Geopolitics - Week of September 11, 2026

Oil: OPEC+, Shale & Geopolitics for the week of September 11, 2026. Podcast synthesis on the US sinking Iranian tankers as Brent tops 100 dollars, diesel closing in on 6 dollars a gallon with Ukraine's drone strikes on Russian refineries as the real culprit, how oil still slips out of the Gulf every night, the first serious legal challenges to the Venezuela deal, and a forecast split running from 40 to 120 dollars.

Oil: OPEC+, Shale & Geopolitics

Week of September 11, 2026: Oil War Reignites as US Sinks Five Iranian Tankers and Diesel Nears Six Dollars

The shooting war is back on, Brent is over $100, and the real diesel emergency turns out to be made in Russia, not Iran.

Two weeks ago the big oil story was a deal: America planting a flag in Venezuela's oil. This week the story went back to being a war. The United States and Iran traded blows again around the Strait of Hormuz (the narrow sea channel off Iran that a fifth of the world's oil normally passes through), and this time it was not rhetoric. The U.S. Navy sank Iranian oil tankers, Iran fired ballistic missiles at U.S. warships, and Brent crude, the main global price, punched back above $100 a barrel for the first time since July. By the end of the week some traders were quoting it as high as $107.

But the number that will actually show up in ordinary life is not the price of crude. It is the price of diesel: the fuel that moves trucks, trains, ships, farm equipment and, in much of the northeast, heats homes. Diesel set a fresh all-time record almost every single day this week and is now within a few cents of $6 a gallon. And in one of the week's genuine surprises, the people who study fuel for a living kept pointing away from Iran and toward a second war entirely: Ukraine's drone strikes on Russia's refineries.

This issue walks through five things: the war turning hot again and what it did to prices; the diesel squeeze and its Russian root cause; the surprisingly clever ways oil is still sneaking out of the Gulf every night; the first serious cracks in the Venezuela deal, now being called "illegitimate and probably illegal" by people who know the country; and the strange, wide-open argument over where crude goes next: one respected voice says $40, another says $120.

1. The war turns hot again: five tankers sunk, and Brent tops $100

The week's hinge was a sharp military escalation. According to a report on Bloomberg Daybreak: US Edition, the U.S. destroyed five Iranian oil tankers after Iran attempted a ballistic-missile strike on a U.S. Navy warship. Secretary of State Marco Rubio (a government official, speaking to reporters in Colombia) laid out the grim logic without blinking: "The back and forth is pretty straightforward, and that is that Iran continues to try to hit U.S. naval ships. And for every time they do that or try to do that, they're going to lose tankers."

The same weekend was described from a second angle on CNBC's The Exchange, where correspondent Eamon Javers (a reporter) reported the U.S. military struck three Iranian crude tankers in response to the Revolutionary Guard launching ballistic missiles toward two U.S. Navy warships, an aircraft carrier and a guided-missile destroyer that both evaded the attack. CENTCOM said at least one Iranian vessel, the motor tanker Kylo, "sank in the Gulf of Oman today and joined Iran's navy at the bottom of the sea." Javers summed up the standoff: "It's eyeball to eyeball economically… who's making the bigger gamble? We just don't know how long this is going to take to play out." The tit-for-tat pattern was independently confirmed on Tom Bilyeu's Impact Theory and on TraderMerlin.

It was not only Iran and the U.S. On the same day, The Exchange reported that Iran-aligned Houthi fighters in Yemen struck Saudi oil infrastructure and utility targets, wounding as many as 70 people, and that Saudi Arabia "temporarily suspended" operations at oil facilities in its southern region while firefighters put out the blazes. Reuters World News called the Houthi attack a "massive escalation" that injured nearly 100 people and pushed oil to six-week highs, and separately flagged unconfirmed explosions near Iran's Kharg Island (the hub of Iran's own oil exports) on September 5.

The price reaction was fast. Bloomberg Middle East news director Will Kennedy (a reporter) noted on Bloomberg Daybreak that Brent was near $99 (up 2%) and WTI, the U.S. benchmark, at $94.34 (up 3%), and reminded listeners how far the market has traveled: oil "had touched the 60s" as recently as July. By September 9, Squawk on the Street marked Brent crossing $100 "for the first time since July," with retail gasoline jumping more than a dime in a single day. And by September 10, commentator Brian Seitel on The Dividend Cafe had WTI closing at $102 and Brent at $107 (oil up roughly 20% in a week and a half), noting that with the Houthis contesting the Bab el-Mandeb strait as well, "both major oil chokepoints are now under threat." On the Financial Times' Unhedged, Robert Armstrong simply pegged oil at $105 and said the conflict, now grinding on since February, showed "neither side willing to back down."

2. Diesel closes in on $6, and the real culprit isn't the one you'd guess

If the war is the loud story, diesel is the one that reaches your driveway, your grocery bill and, soon, your heating bill. And it kept breaking records this week, almost daily:

• September 4: national diesel hits a record $5.85 a gallon, noted by both Tom Caza of Gulf Oil on The Financial Exchange Show and Tom Kloza of Gulf Oil on Closing Bell.
• September 7–8: diesel prints a new record $5.90 (The Financial Exchange Show); on FTR | State of Freight, trucking analyst Avery Weiss clocks $5.967, up 36.8 cents in a single week and 16 cents above the old June 2022 record.
• September 10: grain analyst Joe Vaclavik on Grain Markets and Other Stuff reports a record $5.94 and "will likely reach $6 before week's end"; AG Bull cites EIA on-highway diesel at $5.98, up more than 40% since late February.

The last gap to $6 may already be closed at the wholesale level. On Squawk on the Street, Jim Cramer (a commentator) pointed out that wholesale diesel is up 24.1%, which "implies $6.15 to $6.25 per gallon" at retail (in his words, essentially ensuring a $6 pump price). Regional numbers are already far past that: petroleum analyst Patrick DeHaan of GasBuddy, on Power Lunch, said California diesel is "eclipsing $8.50 a gallon" and warned that sustained high diesel is a "silent killer of the U.S. economy… if we get a cold winter, it's certainly not going to be pretty at all." He repeated on Morning Brew Daily that diesel is up more than 55% and heating oil up 70% since the conflict began. It has crossed borders, too: on The Canadian Investor, the hosts noted Canadian diesel jumped from C$1.90 to C$2.50 a liter in two months, with Quebec nearing C$3.

Why diesel and not crude? The key insight this week came from an operator's-eye view of the plumbing. On S&P Global's Energy Evolution, the firm's oil editors explained that the profit from turning crude into diesel (the "crack spread") has hit record highs, and that "an almost $100 diesel crack cannot buy more refining capacity." That is the whole problem: the world is not short of crude oil, it is short of the refineries that turn crude into usable fuel. To plug the gap, the U.S. Gulf Coast is now exporting record volumes: 54 million barrels in July, breaking the prior record by 7.5 million, mostly to Europe and South America (Brazil, one editor said, now "considers the U.S. as their personal inventory"). And U.S. Gulf distillate inventories, the editors warned, sit at their lowest levels since the 1980s and are still falling. The colour from the pros was that prices have not peaked: "The world is incredibly short of diesel… I don't believe we have seen the peak just yet."

The insider warning, and the surprising villain. Two operator voices tied it together. Gulf Oil's Tom Caza on The Financial Exchange Show again reached for his blunt phrase ("the world has never entered winter with lower diesel and heating oil stocks"), warning of "stupid, stupid numbers," potentially $6 to $8 a gallon, made worse by a two-month refinery outage in New Brunswick and by any hurricane. On the following episode he noted crack spreads above $100 a barrel and that roughly one-third of New England homes rely on heating oil, drawn from the very same distillate pool now being drained.

But the sharpest reframing came from Doomberg (a widely-read analytical newsletter, i.e. a commentator) on The Competent Investor. Asked what is driving the diesel crisis, the answer was emphatic: "It's not really the constraints of the Iran war that are driving the ongoing diesel crisis. It is, in fact, Ukraine's steady attrition [of] the Russian refinery assets." Ukraine's drones, he argued, have taken Russian refineries offline and forced Russia to halt diesel exports, so "the world [is] losing 15% of global seaborne diesel." Vaclavik on Grain Markets put a number on the Russian damage: drone strikes have knocked out about 40% of Russian refining capacity, forcing a total export ban, and offered the week's single starkest statistic: ultra-low-sulfur diesel futures are up 123% year-to-date, against crude up 68%. In other words, the fuel is climbing nearly twice as fast as the oil it's made from.

Doomberg's other warning is worth holding onto. With U.S. refineries running flat-out at 98–102% of capacity, he cautioned, the country is "one refinery explosion away" from a genuine crisis, and those accidents become more likely the harder plants are pushed. On InvestTalk, the host cited Valero's chief operating officer to the same end: global refining is tight, with roughly 5 million barrels a day of capacity sitting idle worldwide.

3. How oil still sneaks out of the Gulf every night: the ex-CIA director's math

For all the talk of a "closed" strait, oil is still moving, and the most detailed inside account of how came from General David Petraeus, the former CIA director and CENTCOM commander (about as authoritative an insider as this topic gets), on The Global Gambit.

Petraeus called the Strait of Hormuz Iran's "weapon of mass disruption," the channel through which 20% of the world's crude and 20% of its LNG (liquefied natural gas) normally flow, and said Iran is wielding it as "enormous leverage." But he then walked through the workaround in remarkable detail. Right now, he said, "somewhere between six and eight million barrels" of oil are getting out each night, and increasingly it is the major oil companies doing it themselves: "They own large crude container ships, they take it through the strait, they're willing to take more risk than are the major maritime lines… and then they do a ship-to-ship [transfer] outside the Strait of Hormuz." Add the more than two million barrels a day the UAE ships to its port at Fujairah on the Gulf of Oman (bypassing the strait entirely), plus what Saudi Arabia pushes across the peninsula to the Red Sea, "and you almost have enough to meet global demand."

His framing of what to watch is the useful part. If the nightly flow can climb to about 10 million barrels (enough to bring global supply and demand back into balance), then "President Trump can hold out for a much longer period of time with his blockade." If it can't, the pressure at home builds, because "we're less than 100 days from midterm elections" and the president "desperately wants to get back to his affordability agenda." Petraeus's own bottom line was sobering: his "worst fear," he said, is that Iran emerges from this "militarily quite weakened, but strategically strengthened," because controlling the Gulf "is almost more powerful than the weapon of mass destruction they were trying to achieve through nuclear means." He also noted a demand-side release quietly holding prices down: China has drawn on "the biggest strategic stockpile in the world… estimated to be a billion barrels of oil."

Two more insider notes rounded out the shipping picture. On The Smashi Business Show, UAE Foreign Trade Minister Dr. Thani Al-Zeyoudi (a government official) called the strait a "red line," revealed that the UAE's non-oil trade still hit a record 1.94 trillion dirhams in the first half of 2026 (up 13.1%) despite six months of disruption, and disclosed a possible off-ramp: Iran's Revolutionary Guard has proposed jointly managing the waterway with Oman and charging toll fees, a hint that the endgame may be a tollbooth, not a ceasefire. And on the shipping-industry side, S&P Global's LNG editor Ed Cox on ICIS warned the strait's closure has choked off 20% of global LNG and 7 million tons of Qatari gas a month, leaving European storage only 65% full (versus a normal 80% floor) heading into winter, and Qatari supply may not return until the end of the first quarter of 2027. Shipping executive Nils Roche on The Loadstar called Hormuz "basically untenable for six months," with 19% of Asia–Europe container traffic now rerouting through Suez.

Not that everyone agrees oil is really moving. On the pundit side, the host of DHUnplugged claimed ship-tracking data shows essentially no vessels transiting the chokepoint despite hundreds circling nearby, and an analyst on How to Trade Stocks and Options with OVTLYR Live put the shut-in figure at 6–7 million barrels a day with no near-term reopening. The exact number is genuinely contested; the direction is not.

4. The Venezuela deal hits its first real wall: "illegitimate and probably illegal"

Two weeks ago the news was that America had struck "the biggest oil deal in world history" in Venezuela. This week, for the first time, serious people who actually know the country and its oil industry started pulling the deal apart, not on hype, but on law and durability.

The most substantive session was on Columbia University's Columbia Energy Exchange, which brought together two genuine insiders: Luisa Palacios, former chairwoman of Citgo (the U.S. refiner owned by Venezuela's state oil company), and Bob McNally, founder of Rapidan Energy and a former White House and National Security Council energy official under two presidents. Their concerns went well beyond the headline.

First, the legal foundation looks shaky on both ends. Palacios explained that the White House fact sheet describes a "100-year oil lease," but "that figure does not exist in Venezuela's constitution or in the new hydrocarbon law… There are no concessions in Venezuela either." Venezuelan law allows the state oil company to work with private firms only through joint ventures of up to 25 years, and indeed, she noted, Venezuela's own officials have since been quietly "clarifying" that it's really a 25-year deal. Her deeper worry was process: 17 fields holding 65 billion barrels were handed over "with no competitive bidding and in secrecy." As she put it, "all of those details should be well known. I should not have to be guessing."

McNally raised a matching problem on the American side. He said he could not understand how the U.S. government would take an equity stake "especially if it's through the Pentagon's Office of Strategic Capital, which explicitly says… it doesn't take equity stakes." His verdict on durability was blunt: "Congress is obviously not going to ratify this," and the arrangement has an expiration tied to January 20, 2029, meaning "you really need the next president to fully support this." His summary of the whole enterprise: "It creates problems while trying to solve problems… having Uncle Sam sit with you at the table as your business partner is not necessarily the thing you want." Palacios also filled in the fuller scope, noting the same week brought a Chevron pledge, an Eni oilfield agreement and a GE Vernova deal to fix the electric grid: "all told, Venezuela signed deals covering more than 150 billion barrels of oil resources."

The bluntest attack came from economist Steve Hanke of Johns Hopkins, an adviser on Venezuela, on The David Lin Report. He called the August 31 deal "illegitimate and unhelpful," and explained why in plain terms: it "was never debated in the National Assembly… and then it was signed under duress." His analogy: a contract signed with a gun to your head is void in any U.S. court, "and that's essentially the kind of deal that was struck in Caracas, because, believe me, Trump does have a gun at Delcy Rodríguez's head. So that makes it illegitimate and probably illegal." He doubts it survives: "They aren't going to be around for 25 years, baby, and this thing will be overturned very quickly." Even on the numbers, he was skeptical: Venezuela pumps about 1.2 million barrels a day now; even doubling it to the promised 1.5-million-barrel increase only gets the country to roughly 2.7 million, still below its 1998 peak of about 3.4 million.

There's also a question mark over the man at the center of it. On Unf*cking The Republic, the host laid out the résumé of Alejandro Betancourt, the majority shareholder of North American Blue Energy Partners (NABEP) chosen to run the deal: a 2018 U.S. investigation into the alleged theft of more than $1 billion from Venezuela's state oil company, ongoing Swiss extradition proceedings for money laundering, and a Spanish investigation into his firm Derwick Associates.

What the deal's backers say. On the operator side, the actual corporate commitment continues to be repeated with consistent figures: Chevron's roughly $7 billion pledge to more than double its Venezuelan output toward 600,000 barrels a day by 2031 at under $20 a barrel to extract, with CEO Mike Wirth framing it as "patience pays off" after two decades in the country (Telltales; Big Digital Energy). Energy analytics firm RBN Energy, on its blogcast, relayed Energy Secretary Chris Wright's official targets of 1.5 million barrels a day by the first half of 2027 and 2 million longer-term. And on the pundit side, Valuetainment host Pat Bet-David framed the whole thing as "3D chess": $100 billion of promised private investment, $209 billion of extra tax revenue for Venezuela, and a strategic bonus of cutting China out of Venezuela's oil. The gap between the two camps is the story: the operators and insiders are talking about risk and legality; the promoters are talking about strategy and barrels.

5. The $40-versus-$120 argument: shortage or panic?

Here is what's remarkable about this rally: the professionals cannot agree whether it's real. This week produced one of the widest forecast splits in memory, from bank strategists calling for $150 to one veteran voice insisting the right number is $40.

The bulls lean on scarcity. BofA's Francisco Blanche laid out his ladder on Squawk on the Street, anchoring it on the fact that close to a billion barrels have already been drawn from the world's strategic and commercial stockpiles, with near-record diesel as a key upside risk into winter. Goldman's widely-cited $120 call assumes the strait stays constricted. And the loudest bull framing came from Doomberg on The David Lin Report, warning of a "real super spike" across all asset classes.

The bears argue this is a panic, not a shortage, and that panics reverse. The most striking bear is Mike McGlone of Bloomberg Intelligence on The Competent Investor, who noted crude at $92 is at a level "first traded in 2007" and sees that as a signal of coming mean reversion; his target is $40 a barrel as the "low-price cure," driven by record Western Hemisphere production and the old rule that high prices eventually kill demand. Treasury Secretary Scott Bessent, quoted on Paul Barron, likewise expects oil to fall to $40–50 as supply comes online, the same swagger he showed on Bloomberg Daybreak daring markets to bet against him: "I am the house." Pundit Peter Schiff, on his show, dismissed Bessent's forecast as "lies" and expects prices to stay elevated. Even the near-term technical read was mixed: Saxo Market Call noted November Brent touched roughly $102 and WTI just under $98 before pulling back.

6. The quieter signals: China's "crash diet" ends, Texas drills again, and a September 24 date

Three developments away from the headlines matter for where this goes.

China is coming off its diet. For most of the war, the single biggest force holding oil down has been China simply buying less. Rapidan's Bob McNally put it vividly on The Exchange: "The biggest factor containing crude oil prices since this thing started has been China's crash diet… it just dropped four and a half to five million barrels a day overnight of imports. Well, it's coming off the diet, and it's thirsty and it's hungry. It's starting to bid crude up." Bloomberg Daybreak confirmed the shift, reporting China "has been increasing its crude purchases in recent days" after an earlier pause "had kept a lid on prices." If that continues, it removes the market's main shock absorber.

Texas is quietly answering the price signal. This is the shale story the headlines missed. Oil economist Karr Ingham (former president of the Texas Alliance of Energy Producers, an industry insider) explained on Energy News Beat that the Texas rig count had fallen for three straight years even as production kept climbing (a testament to drilling efficiency), but that the February war changed the math. Since April and May, the rig count "stabilized and then began to go north pretty sharply," rising from 229 in December 2025 to 282 by early September, and the industry has added jobs after shedding more than 11,000. The war, he said, "is singularly responsible for higher prices for crude oil in 2026." But he threw cold water on the idea that Texas can ride to the rescue quickly: the heavy lifting is done (Texas already pumps close to 6 million barrels a day, up from roughly 1 million fifteen years ago), and near-term he expects only "a few hundred thousand barrels a day" more, not another million. Elsewhere, Big Digital Energy noted the national rig count was essentially flat week-on-week: "noise, not signal."

A calendar date still hangs over everything: September 24. The Trump–Xi summit set for that day in Washington remains the pressure valve, though The Prof G Pod, with the FT's China team, expects trade and AI to dominate and little dramatic to be announced, with China holding strong leverage given its ~70% grip on rare-earth minerals. And on the war itself, academic Vali Nasr on WTFinance confirmed there is no active ceasefire: a June memorandum of understanding functioned as a truce for the war's first 40 days, then "collapsed when the U.S. refused to implement its terms." Iran's opening demands remain maximalist: reportedly $300 billion in compensation, full sanctions relief and $100 billion in frozen assets released (The Zach Foust Show), and commentator Matthew Hoh, on Coffee and a Mike, argued the U.S. blockade strategy is weaker than the 1990s Iraq model it copies because most of the world, including the Shanghai Cooperation Organization, is ignoring the sanctions.

7. The scoreboard, and the bottom line

Where prices sat as the week closed: WTI around $96–$102 and Brent around $100–$107 by September 10 (The Dividend Cafe; Grain Markets), oil up roughly 20% in ten days. National diesel: a record near $5.98, essentially at $6, with California past $8.50 and wholesale prices already implying a $6+ pump price nationwide.

Put it together and the week told a two-front story. The front everyone watches, the shooting war around Hormuz, got worse: five tankers sunk, Saudi facilities on fire, Brent back over $100, and a former CIA director warning that Iran may come out of this weaker militarily but stronger strategically, holding a tollbooth on 20% of the world's oil. But the front that will actually hit wallets is quieter and, it turns out, is being fought a thousand miles away: Ukraine's drones are grinding down Russia's refineries, and that, more than Iran, is why diesel is about to cross $6 and why heating-oil country is staring at the thinnest winter cushion on record.

The optimists have real arguments: crude is genuinely abundant, China's stockpile release and America's own record exports are papering over the gaps, Texas is drilling again, and voices from Bessent to McGlone think $40 oil is the honest destination once the panic fades. The pessimists have the harder near-term facts: a billion barrels already pulled from global storage, refineries redlining at 100%, no ceasefire, and winter coming.

Everything still runs through three things the U.S. does not control: whether China's returning appetite overwhelms the fragile supply balance, whether Ukraine keeps hitting Russian refineries, and whether the shooting around Hormuz ever stops. Watch the September 24 summit, watch whether diesel prints a "6" at the pump, and watch the first cold snap. The rest is noise.