A Risk Premium That Doesn't Need a Blockade

The Strait of Hormuz is not closed: flows there reach about 80% of their pre-war level, and nearly 95% of ships pass through without incident. Yet the cost of passage has changed in nature. Insurance has become so expensive that in early October, chartering a giant tanker in certain regions cost more than sending a rocket into space. October recorded a record number of at least 28 damage reports, and there have been 121 incidents and 24 confirmed deaths of sailors since the start of the conflict.

This mechanism explains why a moderate-intensity conflict can weigh durably on prices: uncertainty is priced continuously. An escalation could, according to one economist's estimate, push oil into a range of $120 to $130, while Washington hints at new strikes after the November 3 elections. What happens next therefore hinges on the political calendar as much as on the ground.

First Effect: Off-the-Charts Refining Margins

The downstream oil sector is the first visible beneficiary. The three Indian state distributors cumulatively posted 30,106 crore rupees in profit in the second quarter, up 68.3% from a year earlier and a reversal after a loss of about 18,150 crore in the previous quarter. HPCL's gross refining margin rose from $8.80 to $32.15 per barrel, and BPCL's from $10.78 to $32.53.

This recovery remains uneven and fragile, however. IOC accounts for the bulk of the gain with a quarterly profit of 21,630 crore, nearly triple last year's, while BPCL (-22.5%) and HPCL (-9%) decline. Gasoline and diesel prices have been frozen since May and LPG prices since March: cumulative under-recoveries reach 67,900 crore, and the loss per LPG cylinder is expected to rise from 184 rupees in September to 370 in December. IOC itself warns that profitability could suffer from inventory losses if the situation in the Middle East normalizes. The refining windfall therefore depends on tensions persisting, which gives it a precarious character.

Second Effect: France, Maximum Exposure in the Eurozone

At the other end of the chain, importing economies absorb the extra cost. France is the only eurozone country whose GDP contracted in the third quarter of 2026 compared with the same quarter of 2025. Unemployment climbed back to 8.5% in September, up 0.6 points year on year, three times the average for the Union and the eurozone. Austria, Estonia and Finland nonetheless saw even sharper increases, which rules out any talk of an absolute exception.

The energy channel does not act alone: rising fuel costs combine with heatwaves, which hit tourism and agriculture, and with persistent political instability. But the sequence is legible: an energy surcharge adds to already strained demand and public finances under pressure. Fitch kept the rating at A+ while revising the outlook from stable to negative, estimating that the fiscal adjustment needed to stabilize debt reaches about 3.5% of GDP, versus 3.0% in August. The cost of energy is not the sole cause of this deterioration, but it worsens the underlying picture.

Third Effect: Energy Becomes an Electoral Issue

In the United States, the channel is political. Repeated increases in fuel, food and housing costs fuel voter anger ahead of the midterm elections. The gap between the presidential rhetoric on the economy's good health and households' actual spending on gasoline and basic goods could, according to the file, prove decisive for Republicans, who hold a 220-to-215 majority in the House. The conflict with Iran thus brings foreign policy back into voters' daily lives, via the pump.

This pressure also weighs on the strategic decision: relaunching strikes would not guarantee neutralizing Iran's capacity to harass shipping in the strait, while blockading Iranian oil exports severely handicaps a $300 billion economy. Each side bears a cost, which sustains a stalemate rather than a resolution.

What the Markets Say

Late-October indicators confirm a cautious climate without panic. The Fear & Greed index stood at 26.16 on October 30 and then 26.24 on October 31, a near-stability in fear territory. The calculated gold/copper ratio fell from 8,675.33 to 8,583.94, about 1%. This second signal does not point in the same direction as the first: relatively firmer copper is not the mark of a generalized defensive retreat. Two daily data points are not enough to settle the question.

The Limits of the Reading

Several caveats are in order. First, the share of energy in France's contraction cannot be measured with the available data. Second, most maritime traffic passes without hindrance, which nuances the idea of a physical supply shock. Finally, the query on macroeconomic series and OECD leading indicators did not succeed: the historical data needed to test the narrative against long series are therefore missing. The gains of Indian refiners also include one-off inventory effects.

A Proportionate Conclusion

The facts converge on a precise idea: the risk premium around Hormuz creates winners and losers depending on one's place in the energy chain and the robustness of national fundamentals. Refiners are banking margins, France sees its fragility accentuated, and the American debate crystallizes around the price at the pump. Going further, by predicting the price trajectory or the lasting scope of these imbalances, would exceed what the data allow. The next test is known: the November 3 vote and the decisions that follow.

This article was written with the assistance of artificial intelligence and verified by our editorial team.