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

Notably, the shipping industry, already heavily constrained by restrictions on transit through key waterways such as the Strait of Hormuz, faces another challenge stemming from the US-Israel war on Iran and Russia's war on Ukraine: a shortage of fuel oil applied by.

Key points

• Energy consultancy Energy Aspects informed Reuters news agency that it expects the fuel oil market to face a deficit of 218, 000 bpd in the third quarter.
• While its fuel oil exports have dropped, according to Kpler, Nigeria's 650, 000-bpd Dangote refinery, for instance, has ramped up diesel, petrol and jet fuel exports.
• How have wars in West Asia and the Russia-Ukraine war impacted fuel oil?
• According to analysts, the wars in West Asia and Europe, along with refiners opting to produce more profitable fuels, have contributed to the shortage.
• Besides the war on Iran, Russia's ongoing war on Ukraine has additionally impacted oil supplies.

Notably, the fuel applied by ships powers the transport of substantial cargoes worldwide. Any shortage of this fuel could drive up global freight costs. It could in turn affect consumers and manufacturers of goods and commodities.

Most ships and oil tankers mainly employ heavy fuel oil (HFO), commonly known as bunker fuel, to power their engines. This fuel is produced when crude oil is refined.

Other commonly applied marine fuels include marine gas oil (employed by smaller vessels), marine diesel oil (applied in marine engines) and less polluting fuels like highly low sulphur fuel oil (VLSFO). Why is ship fuel running low and why does it matter? Here's what we know. Why is ship fuel running low?

Middle East fuel oil exports were down by 45 percent year on year to an average of 447, 000 barrels per day from March to August, data from energy trade analytics firm Kpler demonstrates.

Energy consultancy Energy Aspects informed Reuters news agency that it expects the fuel oil market to face a deficit of 218, 000 bpd in the third quarter. When it was a marginal 6, 000 bpd, this is the first shortfall it has estimated since the third quarter of 2025.

In practice, the US-Israel war on Iran has paralysed key maritime trade routes like the Strait of Hormuz, through which regarding 20 percent of global oil and gas passed before the start of the war.

Iran has additionally hit multiple oil facilities in the Gulf in retaliation against the US.

Attacks by Yemen's Iran-aligned Houthis on shipping in the Red Sea and around the strategic Bab al-Mandeb Strait, one of the world's most significant shipping routes, have additionally disrupted shipping and constrained supply routes.

Besides the war on Iran, Russia's ongoing war on Ukraine has additionally impacted oil supplies. Ukraine has in recent weeks bombed multiple major Russian refineries.

Russia is the world's second-largest exporter of crude oil. Ukrainian drone attacks have affected Russia's refinery output, with its fuel oil exports in August hitting a record low 591, 000 bpd, down from an average of over 860, 000 bpd in 2025, according to Kpler data going ⁠back to 2017.

Meanwhile, the net result: less crude is being shipped out from key oil-producing regions, especially the Gulf and Russia.

That has meant an overall shortage in supplies of crude. And oil firms aren't prioritising fuel oil as their product of choice. What are refiners prioritising with the crude oil they're getting?

Petrol, diesel and jet fuel. It are additionally produced when crude oil is refined, have all been impacted. But products like diesel tend to support suppliers generate higher profits, and they prioritise it over products like fuel oil.

Market observer Sunil Reddy remarked in a post on X on Monday that one of the key reasons for a global ship-fuel shortage is "the extraordinary profitability of diesel".

"When diesel cracks spreads become extremely high, refiners have a powerful incentive to squeeze as much diesel and as feasible out of every barrel. That changes what happens to the heavier part of crude, " he remarked.

He explained that in the refining process, instead of "allowing more of that heavy residue to remain as fuel oil for ships, refiners will send it through secondary processing units and upgrade it into higher-value products such as diesel".

"So, extremely strong diesel margins effectively start pulling barrels away from the bunker-fuel market, " he remarked, adding that this would rise ship-fuel rates as well. Which regions will be most impacted?

While a drop in ship fuel will have a large-scale impact on global shipping, Asia could be particularly affected since of its dependence on the Gulf.

According to Kpler data, Singapore, the world's largest bunker hub, imports more than half of the almost one million ⁠bpd of fuel oil it consumes. A drop in fuel oil supplies has additionally led to a rise in the rate of shipping fuels like VLSFO.

As of September 1, according to data ⁠from bunker rate platform ZeroNorth, in Singapore, the cost of this fuel is up 76 percent since the war on Iran began to just less than $825 per metric tonne, or $130 a barrel.

Besides Singapore, fuel oil stocks in Amsterdam-Rotterdam-Antwerp in the Netherlands and Fujairah in the United Arab Emirates are additionally concerning 30 percent below their three-year seasonal averages, according to Reuters.

Market observer Reddy remarked on X: "The world economy is built on thousands of interdependent supply chains. One product depends on another country for raw materials, another for processing, another for machinery, another for energy."

"Without ships, globalisation breaks. When ship fuel becomes too scarce or too expensive, plenty of things don't just become more expensive, " he went on. "At some point, some trade simply stops making economic sense."

In short, iran and Ukraine wars: Why ship fuel is running short, and why is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.