A growing shortage of fuel oil used by ships and power plants is threatening to push up transportation and energy costs as wars and refinery disruptions squeeze global supplies.

Energy analysts expect the fuel-oil market to face a deficit of around 218,000 barrels per day in the third quarter of 2026, a sharp deterioration from the estimated 6,000-barrel-per-day shortfall recorded during the same period last year.

Refineries Shift Toward Higher-Value Fuels

Refineries are increasingly directing available crude toward products such as diesel, gasoline and jet fuel, which can generate stronger returns than fuel oil. At the same time, disruptions caused by attacks and reduced refinery operations are limiting the amount of crude that can be processed.

The situation has been aggravated by disruptions involving refineries in Russia and the Middle East, while China has also reduced some refining activity and exports as it seeks to protect domestic fuel supplies.

This combination is tightening the availability of fuel oil at a time when shipping companies and power producers are already facing higher operating costs.

Asia Faces the Biggest Pressure

Asian markets are expected to experience some of the strongest effects because the region relies heavily on fuel flows from the Gulf.

Singapore, the world’s leading marine-bunkering center, is particularly exposed. More than half of its roughly one-million-barrel-a-day fuel-oil demand is supplied through imports, making disruptions to regional shipping routes especially significant for the market.

Fuel inventories at major trading hubs, including Singapore, the Amsterdam-Rotterdam-Antwerp region and Fujairah, are already estimated to be about 30% below seasonal levels, leaving less protection against additional supply interruptions.

Marine Fuel Prices Rise Sharply

The shortage is already showing up in marine-fuel prices. Very-low-sulfur fuel oil prices in Singapore have increased by about 76% since the start of the Iran war, considerably faster than the roughly 40% rise in Brent crude over the same period.

For shipping companies, more expensive bunker fuel can quickly translate into higher voyage costs. Operators may ultimately pass some of those additional expenses through to freight rates, potentially affecting the price of transporting goods around the world.

Global Trade Could Feel the Impact

Fuel costs are one of the largest variable expenses for many commercial vessels. A prolonged shortage could therefore affect container shipping, bulk carriers, tankers and other forms of maritime transportation.

Higher marine-fuel prices could also increase costs across supply chains, particularly for goods that travel long distances by sea. Import-dependent economies in Asia could face additional pressure if both fuel availability and shipping costs deteriorate simultaneously.

Energy Market Risks Continue to Build

The fuel-oil squeeze comes as several other refined petroleum products are also facing tighter markets. Diesel, gasoline and aviation fuel supplies have been affected by refinery disruptions and increased demand.

The situation illustrates how conflicts can influence global markets well beyond the immediate battlefield. Damage to refineries, restrictions on maritime traffic and disruptions to crude shipments can eventually affect factories, transport companies, power producers and consumers thousands of kilometres away.

If refinery disruptions and restrictions on oil transportation persist, the fuel-oil market could remain under significant pressure through the remainder of the quarter.