Global oil markets are in turmoil due to the ongoing Iran war, but the real pain is hitting diesel and jet fuel harder than raw crude. Goldman Sachs’ latest report uncovers why refined petroleum products are experiencing sharper price spikes amid widespread supply chain chaos.
Launched on February 28, the US-Israel campaign against Iran has paralyzed the Middle East’s energy sector. The Hormuz Strait blockade has halted oil and product exports, while strikes on refineries and facilities have curtailed production across the region.
Crude benchmarks like Brent have jumped more than 40% to over $100/barrel since hostilities began. However, diesel and jet fuel have seen even steeper climbs, with Asian markets witnessing prices double in some cases. Export restrictions from major consumers including China, Thailand, and South Korea are tightening the squeeze further.
Analysts point to the heavy reliance on medium and heavy crudes from the Persian Gulf, which comprise 60% of the area’s output and are prime feedstocks for diesel, jet fuel, and fuel oil. Limited substitutes mean refiners can’t easily pivot, leading to acute shortages.
The ripple effects are vast. Naphtha supplies, critical for plastics and chemicals, are also under threat – Asia gets 50% from the Gulf, Europe 40% of its jet fuel. Refineries in the Gulf are closing as export routes vanish, compounding the crisis.
With no quick resolution in sight, this conflict threatens to reshape global energy dynamics. Aviation faces soaring costs, trucking margins erode, and petrochemical-dependent industries grapple with uncertainty. The report urges preparedness for a new era of elevated fuel prices.