Asian Jet Fuel Prices Breach $200 a Barrel as Export Bans and War Cut Off Supply

Three weeks into the US-Israeli war on Iran, Asia's aviation fuel market has crossed a threshold that industry analysts had called catastrophic: $200 per barrel, more than double pre-war levels, with thousands of flights already cancelled and no resolution to the Strait of Hormuz blockade in sight.

Asian jet fuel prices have surged past $200 per barrel as of March 20, nearly tripling costs from earlier this year as China, South Korea, and Thailand restrict refined product exports and import-dependent countries scramble for supply.

The figure, reported by the New York Times citing market data, marks a record high in the region's trading history. It follows an earlier peak of $163 per barrel recorded on March 17 by LSEG, which itself had already represented the highest level seen since trading in Asian jet fuel swaps began.

Jet fuel prices soared from $85 to $90 per barrel to $150 to $200 per barrel in a matter of days for an industry where fuel accounts for up to a quarter of operating expenses.

The price spiral traces directly to the US-Israeli military campaign against Iran that began on February 28. Global oil supply is projected to plunge by 8 million barrels per day in March, with curtailments in the Middle East partly offset by higher output from non-OPEC+ producers.

More than 3 million barrels per day of refining capacity in the region has already shut due to attacks and a lack of viable export outlets. The war also eliminated Iran's supply contribution, which accounted for 18% of regional jet fuel, with the outages eliminating 420,000 barrels daily from Middle East supply pools.

China's decision to impose a blanket ban on fuel exports from March 11 made a structurally fragile situation materially worse.

China's ban on exports of diesel, gasoline and jet fuel is set to exacerbate fuel shortages and further boost prices for Asian industry and transportation buyers already grappling with tightening supply caused by the US-Israeli war against Iran.

The ban covers exports valued at $22 billion last year.

Australia, Bangladesh, and the Philippines are especially reliant on Chinese fuel supply and will have to cover their needs elsewhere, with China having provided roughly a third of Australia's jet fuel last year and about half of the Philippines' and Bangladesh's supply in 2024.

A Regional Export Freeze With No Easy Substitute

In addition to China, Thailand has banned most exports of refined fuel, and heavyweight South Korea has limited exports to last year's levels and said it was considering further curbs.

Priti Mehta, senior research analyst at consultancy Wood Mackenzie, said that refiners in India and Japan were also becoming reluctant to issue export tenders.

The simultaneous tightening across Asia's four largest clean fuel exporters has removed the region's principal supply safety valves at the worst possible moment.

"The remaining Asian exporters simply do not have the spare volumes to replicate China's role as the region's swing supplier," Kpler analyst Zameer Yusof wrote.

"As a result, Singapore cracks will likely continue grinding higher in the near term as the market adjusts via replacement barrels or outright demand destruction."

Singapore refining margins, the regional benchmark, had already surged to approximately $30 per barrel by mid-March, marking their highest levels in nearly four years.

In Singapore's fully liberalized retail market, gasoline prices exceeded S$3.00 per liter in mid-March, a significant milestone reflecting not only elevated crude costs but also surging refining margins and tight regional supply conditions.

Amid the supply chain disruptions, petrochemical companies including Singapore's Aster Chemicals and Energy and Indonesia's PT Chandra Asri Pacific have started declaring force majeure, indicating that they may not be able to fulfill their contractual obligations.

The declarations signal that the stress on refined product supply chains has moved beyond pricing and into legal contract territory.

The IEA's Record Release Falls Short of Plugging the Gap

The International Energy Agency took its most aggressive emergency action in its 52-year history.

IEA member countries agreed on March 11 to make 400 million barrels of oil available to the market in response to disruptions resulting from the Middle East conflict, with stocks from Asia Oceania to be made available immediately while stocks from the Americas and Europe will be available starting from the end of March.

The total volume ultimately committed by member states reached 411.9 million barrels, comprising 271.7 million barrels from government stocks, 116.6 million barrels from obligated industry stocks, and 23.6 million barrels from other sources, with 72% in crude oil form and 28% in oil products.

The volume far exceeds the 183 million barrels that member states released in 2022 after Russia invaded Ukraine, but potential supply losses from the current crisis may also be much larger, with the near-halt of flows through the critical Strait of Hormuz keeping vast amounts of crude and fuels off the global market.

Market analysts have questioned whether the release can achieve lasting price relief.

Neil Quilliam, an associate fellow with the Middle East and North Africa Programme at Chatham House, said the IEA release "will not make a large material difference" in the ongoing crisis and called it "a one-shot solution" and "a high-risk strategy," warning that once exhausted, "there is no real alternative."

The IEA's latest Oil Market Report stated that the coordinated emergency stock release provides a significant and welcome buffer, but in the absence of a swift resolution to the conflict, it remains a stop-gap measure.

The ultimate impact on oil and gas markets will depend not only on the intensity of military attacks but, crucially, on the duration of disruptions to shipping through the Strait of Hormuz.

Thousands of Flights Cancelled, Fares Climbing Globally

Airlines across the Asia-Pacific region have moved into an emergency defensive posture, implementing a wave of flight cancellations, steep fare hikes, and phased fuel surcharges as the US-Israel-Iran conflict sends jet fuel prices toward $200 per barrel.

Aviation fuel currently accounts for up to 40% of an airline's operating expenses.

By March 21, real-time flight tracking via FlightAware showed 237 Asia-Pacific flights currently delayed beyond three hours, with fuel costs now consuming 32 to 35% of operational budgets, up from 24% in January.

Air New Zealand has taken the most aggressive action to date, announcing the cancellation of approximately 1,100 flights (roughly 5% of its total schedule) through early May, primarily targeting off-peak domestic rotations to consolidate fuel use and affecting an estimated 44,000 passengers.

The airline also suspended its fiscal 2026 earnings forecast, citing unprecedented volatility. Scandinavian carrier SAS said on March 17 that it would cancel 1,000 flights in April, adding that even if it tried to absorb the rising fuel costs, the price surge would still be a strike to the aviation industry.

Cathay Pacific has suspended flights to Dubai and Riyadh through March but is adding frequencies to London and Zurich to meet redirected demand.

Qantas has flagged a general fare increase of approximately five percent, warning that some routes may become uneconomical if prices stay at $200 per barrel.

Hong Kong's Cathay Pacific is nearly doubling its fuel surcharge on many routes from mid-March 2026, citing surging jet fuel prices and the impact of rerouting flights to avoid conflict areas, with long-haul surcharges on flights between Hong Kong and destinations in North America, Europe, and the Middle East set to rise to more than double their previous levels.

Air India and Air India Express introduced a three-phase surcharge expansion beginning March 12, with a new Rs 399 fee on all domestic routes and surcharges to Southeast Asia rising to between $40 and $60.

A second phase from March 18 saw long-haul surcharges jump to $125 for Europe and $200 for North America and Australia. Air France-KLM said in a statement:

"The current geopolitical situation in the Middle East has led to a sudden and significant increase in fuel prices, particularly kerosene," announcing fare increases averaging about $57 per long-haul flight for tickets issued from March 11.

Vietnam Running Out of Time, Southeast Asia in Crisis Mode

Vietnam remains the clearest case study in supply dependency failure. Vietnam has announced plans to procure about 4 million barrels of crude oil from non-Middle Eastern countries.

Sam Reynolds, a researcher at the US-based Institute for Energy Economics and Financial Analysis, said that would be equivalent to just six days of consumption for the country.

Based on state media reports that the country has reserves for 20 days, the country is at "high risk of fuel shortages without more crude inflows." Indonesia, Southeast Asia's largest economy, is in a comparably precarious position, maintaining a fuel reserve of about 21 to 23 days, according to local media.

Governments across Southeast Asia are intervening directly in the market to stabilize fuel prices. Thai Prime Minister Anutin Charnvirakul announced a temporary price cap on diesel, while Vietnam said it had started tapping into its fuel price stabilisation fund.

Government offices in the Philippines have moved to a four-day work week, officials in Thailand and Vietnam have been encouraged to work from home and limit travel, and Myanmar's government has imposed alternating driving days.

Australia presents a specific structural vulnerability. Sydney Airport CEO Scott Charlton confirmed the airport is completely reliant on jet fuel imports, with no domestic refinery capacity serving it, and the country holds only 29 to 32 days of jet fuel in reserve — well below the 90-day stockpile obligation for IEA members.

Even before China's export ban, ExxonMobil had chartered up to three shipments of gasoline from the US Gulf Coast to Australia for arrival in late April, an unusual and expensive routing that underscores the depth of the disruption.

Macroeconomic Alarm Bells Grow Louder

The damage is no longer confined to aviation or transport. UN estimates indicate oil prices have risen by around 45% and gas by 55% since late February, with fertilizer prices up 35%.

Regional inflation could rise to 4.6% in 2026, up from 3.5% in 2025, as higher fuel prices feed directly into transport, production, and food costs, hitting poorer households hardest.

Shortages of helium and specialised gases from the Gulf are creating a "near-immediate crisis" for semiconductor and advanced electronics production, while disruptions to petrochemical feedstocks threaten manufacturing across major Asian economies.

The Economist Intelligence Unit said it expected global oil prices to average about $80 per barrel in 2026, which, alongside elevated natural gas prices, "will raise inflation and lower growth across much of Asia."

One analyst said the region could be looking at the prospect of a recession if the situation did not improve in the coming weeks.

The UN's Economic and Social Commission for Asia and the Pacific warned that growth across developing Asia-Pacific economies could slow to around 4.0% in 2026, down from 4.6% in 2025, with poverty, food insecurity, and inequality likely to worsen alongside job losses.

The IEA has reduced its forecast for global oil demand growth in March and April by more than one million barrels per day on average, and for 2026 as a whole by 210,000 barrels per day to 640,000 barrels per day, as higher oil prices and a deteriorating economic outlook begin to erode demand across the product spectrum.

With Iran's new Supreme Leader Mojtaba Khamenei (son of the assassinated Ayatollah Ali Khamenei) striking a defiant tone in his first public address and oil prices resuming their climb following that statement, the market consensus is that the current price floor has more upside risk than any credible downside relief, at least until physical tanker traffic through the Strait of Hormuz resumes at scale.