Oil & Gas

From a business perspective, the fuel oil market in Asia is facing significant supply disruptions as exports from the Middle East decline sharply. Fuel oil exports passing through the Strait of Hormuz normally average about 1.2 million metric tons per month bound for Asia, with nearly 70% heading to Southeast Asia, making the region heavily dependent on Gulf supplies. However, tanker transits through the Strait have dropped by nearly 90% compared with the previous week, forcing traders to search for alternative cargoes from the United States, Mexico and other regions. Traders say sourcing replacement volumes remains difficult because high tanker freight rates have made arbitrage shipments to Asia economically unattractive.

From an economic perspective, the tightening supply has triggered a sharp rally in bunker fuel prices and is likely to increase global shipping costs. Prices for high-sulphur bunker fuel in Singapore, the world’s largest ship refuelling hub, have surged by more than 40% since the conflict began, while low-sulphur fuel oil prices have risen by over 30%. These higher refuelling costs will increase operating expenses for vessel owners and shipping companies, which could eventually pass the additional costs to businesses transporting goods, raising prices across international trade and supply chains.

From a geopolitical perspective, the crisis highlights the global energy market’s vulnerability to disruptions at strategic chokepoints like the Strait of Hormuz. Sanctions on Russian and Iranian fuel oil already limit supply options for many buyers, while the ongoing conflict has also halted some Iranian shipments and disrupted output from regional refineries. If the conflict continues and Middle Eastern exports remain constrained, analysts warn that inventories stored in Singapore and floating storage vessels could begin to decline rapidly, further tightening fuel availability across Asian energy markets.