Dubai crude, which makes up 70% of South Korea's oil imports, refers to oil produced by Middle Eastern oil-producing countries. Traditionally, Dubai crude is the cheapest among the top three global crude oils, though it is less efficiently refined than lighter oils like Brent or West Texas Intermediate due to its heavier nature. Cost factors also play a role, as Dubai crude is transported by oil tankers that use the open seas, minimizing transportation costs compared to pipelines, which require substantial initial investment and maintenance fees.

Recent geopolitical tensions have dramatically raised the premiums on Middle Eastern oil. As of the 20th of the month, the futures price of Dubai crude has doubled to the $130 range compared to pre-war levels. In contrast, Brent and West Texas Intermediate have seen more modest increases of 40-50%, while spot prices for Dubai crude have neared $160. The higher spot price indicates immediate supply constraints, creating a significant disparity between spot and futures prices, especially when contracts often fluctuate based on market prices at the time of delivery.

In contrast to the U.S. and Europe, where oil has been financialized, leading to larger futures markets, the sensitivity of the spot market for Middle Eastern oil is heightened due to limited developments in futures trading. Thus, refineries that depend on this oil often pay a substantial premium in times of conflict, as contracts are tied to prevailing market prices, and disruptions can nullify guarantees of supply. Major oil companies, rather than oil-producing countries, essentially dictate global oil prices, a reality underscored when Donald Trump remarked on the profits from high oil prices, further highlighting the influence of financial markets on oil pricing.