The ongoing conflict in the Middle East has resulted in a significant disruption of oil and fuel shipments through the Strait of Hormuz, a critical chokepoint for global energy supplies. Japanese oil company Idemitsu Kosan has notified its business partners that it may be forced to halt ethylene production at its Chiba complex if the blockade continues to prevent the import of naphtha, a key raw material sourced from the Middle East. This potential halt underscores the broader impact of the crisis on Japan's petrochemical industry and economy, as Idemitsu is a major player in the sector [1].
The disruption has led to a sharp rally in fuel oil markets, with prices for high-sulphur bunker fuel delivered in Singapore rising more than 40% since the start of the war, and low-sulphur fuel oil prices climbing over 30%. Tanker transits through the Strait of Hormuz are now about 90% lower than the previous week, according to Kpler data. The shortage is particularly acute for high-sulphur fuel oil, which typically comes from the Middle East, and traders are struggling to secure alternative supplies from the West due to high tanker rates and limited availability. Russian and Venezuelan supplies remain constrained due to sanctions and logistical challenges, while Chinese purchases of Iranian fuel oil have also halted because of the conflict [2].
Market reactions have been significant: US oil prices have surged by 8%, Asian currencies have weakened, and US stocks have tumbled amid heightened geopolitical risks. US LNG suppliers are expected to benefit from rising Asian demand as Gulf supply halts [1]. According to Fox Business, world oil prices have jumped $30 in the last week due to the wartime risk premium, with 120 tankers reportedly stranded in Persian Gulf ports as insurance rates have increased by 50% to 100% or more, and some contracts have been broken [3].
In response, the US government has announced a plan to deploy maritime reinsurance, including war risk coverage, to restore confidence in maritime trade and stabilize international commerce. The plan, coordinated by the International Development Finance Corporation and the US Central Command, aims to insure oil cargoes and provide military protection for tankers transiting the Strait of Hormuz. The US Navy is expected to play a role in escorting ships through the waterway [3].
Idemitsu is seeking alternative sources of naphtha to minimize production disruptions, but the situation remains fluid and is being closely monitored [1]. Technical analysis suggests oil prices will remain supported at higher levels until alternative routes or suppliers are secured, with trading sentiment remaining cautious [1].
CONCLUSION
The closure of the Strait of Hormuz has caused severe disruptions in global oil and fuel supply chains, leading to price spikes and operational risks for major Asian and global energy players. While the US is taking steps to restore shipping confidence and stabilize markets, the situation remains volatile, with significant market and economic implications if the blockade persists.