On Monday, global fuel markets reacted with a sharp surge in prices to the escalating conflict in the Middle East, which has increased the risk of disruptions to refined product exports from the Persian Gulf region. Diesel (gasoil) posted the strongest gains on the ICE exchange – at the open, prices jumped by as much as 17%, reaching their highest level in two years, although part of the increase was later pared back. By comparison, Brent crude rose by a maximum of around 13%, underscoring that the market was pricing in not only potential constraints on crude supply, but above all the risk of interruptions to deliveries of finished fuels. Alongside diesel, prices of jet fuel and heavier fractions such as heating oil also increased, while price pressure extended to selected energy-related commodities and semi-finished products, including LPG, methanol, and bitumen.
The key source of concern remains the Strait of Hormuz, through which a significant share of global fuel trade flows. According to cited estimates, roughly 10% of global diesel trade and around 20% of worldwide jet fuel and kerosene flows pass through this maritime “chokepoint.” In practice, tanker traffic through the strait has been halted following U.S. and Israeli bombardments of Iran and subsequent retaliatory attacks by Iran against multiple countries, substantially raising the risk premium embedded in transport fuel prices. Political signals have added to the uncertainty. In an interview with The New York Times, Donald Trump suggested that the operation could last “four or five weeks,” which markets may interpret as a sign that tensions are likely to remain elevated at least in the near term.
The region’s importance extends beyond crude oil alone. Saudi Arabia, the United Arab Emirates, and Kuwait are not only major crude exporters but also home to modern refineries producing diesel, jet fuel, and petrochemical components. Iran, meanwhile, is a significant source of fuel oil. As a result, any disruption to shipping in the Strait of Hormuz affects the entire supply chain – from production and exports to maritime logistics – with consequences that tend to appear more quickly and more forcefully in the prices of finished fuels than in crude oil itself.
Further evidence of market tension can be seen in the forward structure of the jet fuel market, which has moved deeper into backwardation – a situation in which prompt deliveries are significantly more expensive than those scheduled for later dates. Such a pricing structure is typical of markets facing immediate availability constraints and indicates that participants are more concerned about short-term shortages than about longer-term supply declines. Spreads have reportedly widened rapidly, nearly doubling in a short period compared to Friday’s levels, another signal of a sudden tightening in supply and logistics conditions. According to Goldman Sachs, average exports of refined products through the Strait of Hormuz last year amounted to approximately 3.5 million barrels per day, illustrating the scale of volumes exposed to risk should the blockage persist.
At the same time, in the absence of reports of major refinery damage in the region, the primary transmission channel of the shock at this stage appears to be shipping risk and the throughput capacity of the Strait of Hormuz, rather than a direct reduction in refining capacity. This distinction is important, as it suggests that price tensions may largely depend on the duration of logistical disruptions and the scale of constraints in maritime transport. For the real economy, this translates into the risk of a rapid increase in transport and logistics costs – particularly through higher diesel prices – and, consequently, mounting price pressure in sectors sensitive to transportation and energy costs, ranging from trade and manufacturing to transport services and aviation.
