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Oil Margins Surge Amidst Iran War Volatility
10 Apr
Summary
- Trader margins for Brent crude and diesel futures have more than doubled.
- Energy prices spiked due to increased volatility from the war in Iran.
- Global oil markets face severe supply disruptions, impacting shipments.
Since the start of the war in Iran, Intercontinental Exchange Inc. has dramatically raised the margins traders must post for Brent crude and European diesel futures. This action was taken in response to surging volatility that has driven up energy prices.
The margin hikes have effectively more than doubled the cost of trading these key energy futures. This occurs at a time when global oil markets are experiencing unprecedented supply disruptions, with critical shipments through the Strait of Hormuz severely impacted over a month into the conflict.
Margins for the nearest Brent futures contract have more than doubled, exceeding $11,000. For the nearest ICE gasoil, or diesel, contract, margins have quadrupled to nearly $21,000. Brent futures soared towards $120 a barrel following the conflict's onset, though prices have eased slightly after a recent ceasefire agreement.
The increased margin requirements follow a pattern seen in 2022 during the Russia-Ukraine conflict, where exchanges also raised margins to manage volatility. If the current conflict in Iran persists, further margin increases for traders may be anticipated.
