I’ve been tracking energy market fallout from the Strait of Hormuz, and every expert I’ve come across keeps circling back to the same uncomfortable truth.
They all say this isn’t a crude oil problem. It’s a refined products problem. And that distinction matters enormously for you paying at the pump.
Francisco Blanch, Bank of America’s head of commodities and derivatives, put the sharpest number on it yet when he appeared on CNBC’s “Squawk Box” on Aug. 10.
To normalize oil prices and prevent an escalation into the winter heating season, Blanch said the global economy needs roughly 10 times the current flow of ships through the Strait of Hormuz.
Right now, Blanch says only five to 10 ships per day are moving through the Strait. Pre-war levels required around 140. Even accounting for rerouting through Saudi Arabia and the UAE, Blanch said the market needs 80 to 100 ships daily to stabilize.
We need to see roughly ten times the flow of ships to normalize prices.
That gap between what’s happening and what needs to happen explains why prices haven’t broken lower, even as some crude supply has been rerouted.
Why refined products tell a more alarming story than crude oil
Here’s the dynamic I find most striking, and it connects directly to what ExxonMobil CEO Darren Woods explained separately in my previous coverage. Retail gas prices have disconnected from crude oil prices because the pressure isn’t coming from a crude shortage. It’s coming from a refinery constraint.
The Strait of Hormuz sits adjacent to one of the world’s largest refining centers. Ukraine’s strikes on Russian refineries have further tightened global diesel and gasoline supply. And China has limited refined-product exports to neighboring Asian countries.
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Three of the world’s four largest refining centers are simultaneously under pressure, and the fourth, the United States, can’t compensate for it all.
Blanch described the resulting crack spreads — the difference between diesel prices and crude oil prices — as near-record territory.
“The price of diesel alone, the differential, is higher than the price of WTI,” he said. “That’s kind of never happened before except for a few occasions.”
The U.S. Energy Information Administration’s weekly data for the week ending July 31, 2026, puts hard numbers on that dynamic, according to the EIA‘s Weekly Petroleum Status Report:
- WTI crude: $86.16 per barrel, up $17.77 versus a year ago
- Ultra-low sulfur diesel: $4.161 per gallon, up $1.822 year over year
- On-highway diesel: $5.348 per gallon nationally, up $1.548 year over year
- Regular gasoline: $4.079 per gallon nationally, up $0.939 year over year
The week-over-week numbers showed modest softening, tied to a slight increase in Hormuz tanker traffic and Saudi plans for a multinational maritime defense effort, according to the EIA report.
But the year-over-year comparisons tell the real story: Energy costs are structurally elevated across every petroleum category.
BofA Chief says Europe is in a more precarious position than the U.S.
Blanch was confident about where the real energy vulnerability sits heading into winter, CNBC noted. Europe, not the United States, faces the sharpest exposure.
The continent is an importer of fuels. It has significant dependence on gas flowing through routes now disrupted by the conflict.
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And this summer brought a fifth consecutive European heat wave, pushing hydroelectric generation lower as rivers, including the Danube, dropped to unusually low levels.
Lower water availability is also limiting nuclear power generation, since reactors require fresh water for cooling, according to Blanch’s remarks.
European natural gas prices have reflected all of this. Blanch cited prices around $20 per BTU during the interview, a level that reflects genuine supply stress rather than speculative positioning.
“If Hormuz doesn’t reopen, most likely yes,” Blanch said when asked whether Europe is facing an energy crisis.
He noted the continent has roughly two months to prepare for the winter heating season. And remember, that’s a tight window given current conditions.
Chris J. Ratcliffe/Bloomberg via Getty Images
How the Hormuz disruption is showing up in Bank of America’s own earnings
Here’s a data point that doesn’t get discussed enough when analysts talk about the geopolitical energy impact. The volatility isn’t just hurting consumers. It’s generating significant revenue for financial institutions managing the risk.
Bank of America’s Fixed Income, Currencies and Commodities (FICC) division posted $3.5 billion in revenue in Q2 2026, up 9% year-over-year, with commodities cited as a primary driver, according to BofA’s Q2 2026 earnings statement.
Total sales and trading revenue jumped 33% year over year to $7.1 billion. The Global Markets segment generated $2.6 billion in net income for the quarter. BofA was also named Commodity Derivatives House of the Year by EnergyRisk during the period, according to BofA.
My read on this is that when a chokepoint like Hormuz goes dark, institutional clients flood into energy derivatives to manage exposure.
BofA’s trading desks captured that flow. The 9% FICC jump and 33% trading revenue surge are the direct financial fingerprint of the Middle East conflict on one of the world’s largest banks.
Blanch’s base case remains $70 to $80 per barrel for Brent crude, CNBC noted, assuming some resolution materializes. But he was candid about the upside risk: Inventories that were drawn down throughout the disruption can no longer serve as a buffer.
If the ship traffic through Hormuz doesn’t recover meaningfully before winter, prices will creep higher, and the refined products market, already at near-record crack spreads, will feel it first.
Related: Chevron CEO evaluates new pipeline route around Strait of Hormuz
