The global shipping industry is facing rising costs and growing supply pressure after the war with Iran and the closure of the Strait of Hormuz disrupted flows of bunker fuel, tightening availability in Asia and sending prices sharply higher at Singapore, the world’s biggest refuelling hub. 

According to an Associated Press (AP) report, bunker fuel, the heavy residual product used to power most large vessels, remains central to world trade. Although it is one of the dirtiest refined oil products, it helps move around 80 per cent of globally traded goods transported by sea. 

That, in turn, means that any prolonged shortage is likely to feed quickly into shipping costs, with wider consequences for businesses and consumers. 

The first signs of strain are already visible in Asia, which depends heavily on Middle Eastern oil. In Singapore, the largest bunkering hub in the world, stocks have so far held up, but prices have climbed steeply as the market reacts to tighter supply. 

Natalia Katona of OilPrice said the prolonged cutoff from key suppliers of heavier crude, including Iraq and Kuwait, would eventually create shortages. “We just see the price in Singapore going up, up, up,” she said. 

Before the war, bunker fuel in Singapore was priced at roughly $500 per metric ton. By early May, that had risen to more than $800 per metric ton. 

Asia has been hit first and hardest, prompting what analysts describe as a form of energy triage. Countries across the region have responded by increasing coal use, buying more crude from Russia and reconsidering nuclear energy plans as reserves come under pressure and subsidy support weakens. 

The implications stretch well beyond the region. According to United Nations data, more than half of global seaborne trade passed through Asian ports in 2024, meaning disruption there is unlikely to remain a regional issue for long. 

Henning Gloystein of Eurasia Group warned that the pain would spread through international supply chains, especially if smaller operators struggle to withstand the pressure. 

For now, shipping companies are bearing much of the cost. June Goh, an oil analyst at Sparta Commodities, said that burden may not stay with them for long and could soon “pass on to the customers”. 

The European Federation for Transport and Environment estimates that the war is costing the global shipping industry 340 million euros per day. 

Oliver Miloschewsky of Aon said bunker fuel shortages typically pass through to freight rates faster than many other cost pressures. While the effect on individual products may appear small at first, he said the combined impact can spread across supply chains and eventually influence consumer prices in a broad range of sectors. 

Consumers in Singapore are already feeling some of that pressure directly, with ferry operators raising fares and luxury cruise lines adding fuel surcharges. 

Shipping companies, meanwhile, have few easy options. Miloschewsky said operators can either pay more for fuel or cut consumption by slowing vessels or suspending sailings. Clarksons Research reported that the average speed of bulk carriers and container ships globally has fallen by around 2 per cent since the war began on February 28. 

At the same time, the crisis is reviving interest in alternative fuels. 

Håkan Agnevall of Wärtsilä said the technology for lower-emission fuels already exists, even if large-scale production and supporting infrastructure still lag behind demand. He added that higher fossil fuel prices are narrowing the gap between conventional and greener options. “That improves the business case for green fuels,” he said. 

Angad Banga, chief executive of The Caravel Group, said shipowners are increasingly willing to pay more for flexibility. The company’s ship management arm, Fleet Management Limited, oversees more than 120 shipbuilding projects, and about a third of those vessels under construction will be dual-fuel capable. 

That means they can run on conventional bunker fuel as well as alternatives such as liquefied natural gas, giving owners more room to respond to market shocks. 

Banga said that in a volatile environment, the ability to switch between fuels carries clear economic value. Even so, he noted that alternative fuels still face limitations. While there are already more than 890 LNG-fuelled vessels operating worldwide, inadequate infrastructure continues to create bottlenecks. 

Still, he said the direction of travel is becoming clearer as pressure on bunker fuel mounts, saying “That progress is real.”