Iran and Ukraine wars: Why ship fuel is running short, and why it matters

The convergence of military conflicts in the Middle East and Ukraine has created an acute shortage of heavy fuel oil that powers the majority of global shipping. Geopolitical disruptions, including Iranian attacks on Gulf oil facilities, Houthi assaults on Red Sea shipping lanes, and Ukrainian strikes on Russian refineries, have collectively reduced crude supplies flowing from two of the world's largest producing regions. Energy analysts project the market will face a deficit of 218,000 barrels per day in the third quarter—a marked reversal from recent trends.

Beyond geopolitical constraints, refiners themselves are exacerbating the shortage by deliberately shifting production away from heavy fuel oil toward more lucrative products like diesel and petrol. As diesel profit margins remain exceptionally high, refiners use secondary processing units to convert heavy crude residue into premium fuels rather than leaving it as bunker fuel for ships. This economic calculus means that even crude oil reaching refineries increasingly bypasses the marine fuel market, compounding supply pressures from regional conflicts.

The impact is already visible in price movements and inventory levels across global shipping hubs. Singapore, which handles nearly one million barrels of fuel oil daily and imports over half its supply, has seen very low sulphur fuel oil prices surge 76 percent since the Iran conflict intensified. Critical storage nodes in Amsterdam-Rotterdam-Antwerp and Fujairah now hold inventories roughly 30 percent below their seasonal norms, signaling tightening supplies.

Asia faces particular vulnerability due to its heavy reliance on Middle Eastern oil and its concentration of shipping infrastructure. Rising fuel costs will reverberate through global supply chains, pushing up freight expenses and ultimately affecting consumer prices for goods dependent on maritime transport. The shortage underscores how disruptions in energy markets can propagate across interconnected economic systems, threatening the cost-efficiency that underpins modern international commerce.