Ship operators are facing a mounting fuel crisis as the Iran war’s closure of the Strait of Hormuz cuts off supplies of bunker fuel, the heavy, low-grade oil that powers the vast majority of global cargo vessels. Bunker fuel is a literal bottom-of-the-barrel product — heavier and dirtier than the refined crude used by cars and airplanes. It sinks to the bottom of storage containers, yet it is indispensable: about 80% of all globally traded goods move by sea, and virtually all of those ships burn it.
The disruption is being felt most acutely in Asia, which relies heavily on Middle Eastern oil. Singapore, the world’s largest refueling hub for bunker fuel, has seen its reserves dwindle and its prices spike. Before the war broke out at the end of February, bunker fuel in Singapore cost roughly $500 per metric ton. By early May it had shot past $800 per metric ton and was still climbing, said Natalia Katona, an analyst for the commodity site OilPrice.
“We just see the price in Singapore going up, up, up,” Katona told The Associated Press.
The prolonged cutoff from major sources of the heavier crude oil needed for bunker fuel — particularly Iraq and Kuwait — will push supplies from tight to scarce, she warned.
Shipping companies are swallowing the added costs for now, but analysts expect those to be passed along soon. “Bunker fuel shortages tend to feed through to shipping costs more quickly than many other cost pressures,” said Oliver Miloschewsky, a risk consultant at Aon. The individual impact on any one product may appear incremental, he added, but the cumulative effect “can ripple across supply chains and ultimately influence consumer prices across a broad range of sectors.”
The war is imposing a steep daily toll on the industry. The European Federation for Transport and Environment calculates that the conflict is costing global shipping about 340 million euros — nearly $400 million — every day as of late April. In Singapore, local ferries have already raised fares and luxury cruise liners are tacking on fuel surcharges.
Ship operators have few good options. They can pay the steep prices, slow their vessels to burn less fuel, or suspend voyages. The average speed of bulk carriers and container ships globally has fallen by about 2% since the war began, according to industry group Clarksons Research.
The spike in conventional fuel costs is also accelerating interest in cleaner alternatives. Håkan Agnevall, president and CEO of marine and energy technology manufacturer Wärtsilä, said the technology to produce lower-emitting fuels exists but production is not yet at scale and green fuels remain more expensive. Still, rising fossil fuel prices are narrowing the cost gap. “That improves the business case for green fuels,” Agnevall said.
Ship owners are responding by ordering more vessels that can run on multiple fuels. Angad Banga, CEO of the Caravel Group, whose Fleet Management Limited manages more than 120 shipbuilding projects, told the AP that roughly a third of the ships under construction are “dual fuel capable” — able to burn both conventional bunker fuel and alternatives such as liquefied natural gas.
In a volatile environment, “optionality has a measurable economic value,” Banga said. He pointed to more than 890 LNG-fueled vessels already in operation globally, though a lack of supporting infrastructure has created bottlenecks. Interest in LNG-capable ships is still rising as bunker fuel constraints bite. “That progress is real,” Banga said.
Asia, which was hit first and hardest by the energy shock, has adopted various forms of “energy triage,” increasing coal use, buying more crude oil from Russia, and reviving plans to develop nuclear power. More than half of global seaborne trade moved through Asian ports in 2024, according to United Nations data, so what transpires in the region’s fuel markets will have worldwide consequences.
Henning Gloystein of the Eurasia Group consultancy warned that the pain will spread beyond Asia through global supply chains, and that some shipping companies will not survive the triage for long. The global maritime industry, built around a single, cheap fuel and a single critical waterway, is facing its most severe stress test in decades.