FOCUS-Baton Rouge to Melbourne: Iran war and rising prices upend jet fuel trade

Thu, 28th May 2026 13:23

* Jet fuel rerouted as Iran blocks Strait of Hormuz, prices surge

* Airlines, refiners and airports scramble to secure supply

* Prolonged disruption could ⁠push prices to $300/barrel - analyst

LONDON/NEW YORK, May 28 (Reuters) - From Antwerp to the Seychelles, Baton Rouge to Melbourne, or New York to Namibia, the closure of the Strait of Hormuz has upended global jet fuel flows.

Rather than acute shortages, the immediate impact has been a sharp rerouting of ‌supply, with cargoes travelling record distances as refiners and traders redraw trade maps to keep aviation moving.

The adjustment shows how flexible global fuel supply chains can be - but also hints at their limits if disruption ⁠persists.

Iran's blockade of the strait - previously a route for around 400,000 barrels per day of jet ⁠fuel exports - sent European prices above $200 a barrel in April, a record.

Europe has since offset much of the lost Middle Eastern supply with imports from the U.S., Nigeria and India.

"It really does come down to who is shortest and most willing to pay," said Sparta Commodities analyst James Noel-Beswick.

That dynamic has allowed Europe to pull in barrels from across the Atlantic and beyond, effectively outbidding other regions - but at the cost of longer routes and higher prices.

SUPPLY CHAINS STRETCHED, ‌NOT BROKEN

Global jet fuel demand is expected to average 7.77 million barrels per day this year, according to the International Energy Agency, little changed from 2025.

With Middle Eastern supply curtailed, buyers are seeking fuel from further afield.

One tanker, the Nord Ventura, sailed for more than a month from Louisiana to deliver about 300,000 barrels of jet fuel to Melbourne, the first such shipment since at least 2017, according to Kpler data.

Europe has sent a rare cargo to the Seychelles and imported barrels from New York Harbour, a region it typically supplies.

Asia has also drawn in cargoes from the U.S. Gulf Coast and Africa, while China has curbed exports to protect domestic supply.

In effect, the market is redistributing supply globally rather than relying on ‌its most efficient routes.

"Jet fuel has become so expensive that, with that price, the market is figuring out alternatives for supply chains," said Wizz Air CEO Jozsef Varadi.

So far, this flexibility - along with stockpiling and refinery adjustments - has helped mitigate the loss ‌of Hormuz flows.

PRESSURE BUILDING

However, the longer the disruption lasts, the harder this balancing act becomes.

Stocks are already showing strain. Independent inventories in Europe's Amsterdam-Rotterdam-Antwerp (ARA) hub have fallen to their lowest since March, while Singapore middle distillate stocks are near two-month lows. Europe is still struggling to fully replace lost flows, even at elevated prices.

"The medium-term is the bigger concern," said Noel-Beswick of Sparta. "If the conflict drags on with no resolution in sight, we could start to see real tightness emerge towards late August and into early September."

The IEA has said Europe could start seeing some shortages of jet fuel by ‌June.

The issue is not just availability, but cost. Longer routes, higher insurance and competition are all putting upward pressure on prices, raising the risk that supply remains available - but increasingly expensive.

AIRLINES ABSORB THE SHOCK - FOR NOW

Airlines have so far weathered the disruption better than expected. While jet fuel accounts for 30% to 40% of operating costs, strong demand has allowed carriers to pass ⁠on some increases in ⁠higher ticket prices.

According to industry calculations, airlines will face an additional $14 billion in fuel costs in 2026, but most have avoided ‌large-scale disruptions to schedules.

Airport operators and governments have helped cushion the blow by building reserves or easing import rules, such as Britain allowing continued imports of fuels refined from Russian crude in third countries.

Yet there are early signs higher costs are eroding demand. The operator of Frankfurt airport, Germany's largest, has warned rising fares could weigh on passenger traffic this year, now seen at the lower end ‌of its 65 million to 66 million forecast.

The longer the Strait of Hormuz remains largely closed, the more strain builds across shipping, refining and storage - and the more prices could rise.

Consultancy Wood Mackenzie estimates that if disruption lasts into late 2026, jet fuel prices in major hubs could approach $300 a barrel.