Oil prices have risen sharply recently due to escalating tensions between the U.S., Israel, and Iran, which have threatened shipping security in the Strait of Hormuz. Concerns over potential disruptions to crude oil supply have intensified, driving a sustained rally in crude prices. By the close on March 4, the main domestic crude oil futures contract had gained more than 31% over the week, while high-sulfur fuel oil and low-sulfur fuel oil futures rose by over 31% and 25%, respectively, during the same period.
To mitigate potential risks and guide the market toward rational behavior, the Shanghai Futures Exchange (SHFE) and its subsidiary, the Shanghai International Energy Exchange (INE), issued notices on March 3 and March 4 aimed at cooling excessive market sentiment and ensuring stable operations.
According to the INE notice released on March 4, starting from the settlement after market close on Wednesday, March 4, 2026, the price limit for crude oil futures contracts sc2604, sc2605, and sc2606 will be set at 14%. Hedging positions will require a 15% margin, while speculative positions will require 16%. For the low-sulfur fuel oil futures contract lu2605, the price limit will also be 14%, with hedging margins at 15% and speculative margins at 16%. The lu2607 contract will have a price limit of 12%, with hedging and speculative margins at 13% and 14%, respectively.
In a separate notice on March 4, SHFE announced that, effective from the settlement after close on March 4, 2026, the price limit for fuel oil futures contract fu2604 will be 17%, with hedging and speculative margins set at 18% and 19%, respectively. Contracts fu2605, fu2606, fu2607, and fu2608 will have a price limit of 14%, with margins of 15% for hedging and 16% for speculative positions.
Domestic crude oil prices have risen more sharply than international benchmarks. Yan Jiantao, chief economist at Jiecheng Energy, noted that international crude had already priced in a geopolitical risk premium of $5–8 per barrel before February 28, leading to relatively moderate gains since March 2. As the catch-up rally concludes, Shanghai crude futures are expected to align more closely with international price trends.
In equity markets, earlier panic-driven surges have subsided, with declines in oil sector stocks reflecting a more rational adjustment in sentiment. Huang Liunan, chief energy and chemical analyst at Guotai Junan Futures, cautioned that frequent geopolitical risks and high volatility in elevated crude prices make blind long positions inadvisable. He pointed out that multiple regions outside the Middle East maintain ample crude supply and reserves, creating uncertainty over further price increases. Additionally, refineries in several countries have already reduced operating rates in response to the situation, which may weigh on oil prices going forward.
Lu Ming, chief analyst at the energy research team of BOC Futures, added that China’s port crude inventories reached relatively high levels in the fourth quarter of 2025, giving some refineries the option to draw down existing stocks in the short term. Among the deliverable crude grades for Shanghai futures, supplies such as Brazilian Tupi, Omani crude (Fahud), and Murban crude (Fujairah) do not transit the Strait of Hormuz, potentially easing supply concerns to some extent.
Dong Dandan, deputy director of the commodities department at CITIC Futures Research Institute, warned that several energy and chemical futures have posted significant gains. Given that both crude oil and natural gas are in a cycle of increasing supply over the medium to long term, a de-escalation in geopolitical tensions could lead to weaker futures prices. Investors are advised to remain cautious and invest rationally.
