According to Hellenic Shipping News, fuel oil shipments through the Strait of Hormuz have stopped completely since the onset of a conflict, with no such vessels transiting as of March 17. In the previous year, 580,000 barrels per day of fuel oil exports moved via this route, the majority being high-sulphur fuel oil.

Read also: Strait of Hormuz Closure Disrupts Global Container Shipping

The blockade has also restricted medium- and heavy-sour crude flows, tightening overall crude supply. Imports of high-sulphur fuel oil from within the strait dropped by 30% month-on-month in early March, with a further decline expected. Should transit resume, exporters are likely to prioritize crude oil over fuel oil due to profitability and contractual obligations.

This supply contraction is most acutely felt in bunker markets at major hubs like Fujairah and Singapore, which rely on these flows, supporting high-sulphur fuel oil prices. The disruption of high-sulphur straight run supplies to destinations including the Gulf of Mexico and Northeast Asia may affect refinery operations there due to feedstock shortages.

The reduction in heavy-sour crude imports further pressures high-sulphur fuel oil production, as these crudes yield more of that product. A significant portion of global seaborne heavy-sour crude imports originated from the strait in 2025. However, the impact on fuel oil output is moderated because these crudes often go to complex refineries in Asia that typically do not export residual fuels.

Low-Sulphur Market Repercussions

The halt in vessel traffic restricts a substantial portion of seaborne crude flows, narrowing available supplies. This crude shortage has repercussions for low-sulphur fuel oil, as refiners seek replacement medium and heavy barrels to produce middle distillates.

Certain medium- and heavy-sweet crude grades from regions like Brazil and Australia, historically used for blending into very low-sulphur fuel oil bunkers, may now be diverted to refiners due to high premiums, potentially creating shortages at key bunkering hubs.

Complex refineries facing crude shortfalls are expected to produce minimal residual fuel, as their equipment is designed to maximize yield of lighter products. The fuel oil market is experiencing a more immediate supply crunch than the crude market, with imports from the strait at a four-year low and price structures widening.

Asian markets are particularly concentrated for affected crude imports, with India and Northeast Asia as primary destinations. Refineries there may need to seek alternative crudes or reduce processing rates. A shift to lighter crude slates would further reduce fuel oil yields.

Meanwhile, the price spread between biofuels and traditional bunkers has narrowed recently, as biofuel prices increased less. This presents an opportunity for shipowners subject to certain European regulations to switch to or increase biofuel consumption, which could reduce short-term demand for traditional bunkers and alleviate some supply pressure.

Source: IndexBox Market Intelligence Platform