How China’s Fuel Export Ban Is Sending Shockwaves Through Asia’s Aviation Sector
A sudden ban on refined fuel exports from China, triggered by the wider energy shock linked to the U.S.-Israeli war against Iran, is now squeezing jet fuel supplies across Asia. Airlines are raising fares, regulators are warning of flight cuts, and procurement teams are racing to find alternative supply sources before their reserves run dry.
The Strait That Broke the Supply Chain
The disruption traces back to the effective closure of the Strait of Hormuz, the world’s busiest oil shipping channel, following the onset of the U.S.-Israeli military campaign against Iran in late February 2026.
Roughly 20 million barrels of oil pass through the strait every day, according to the U.S. Energy Information Administration. Its disruption hit Gulf refineries hard, and several facilities that ship fuel to Asia have since shut down entirely.
KEY CONTEXT
- ~20 million barrels/day: oil volume through Strait of Hormuz (EIA estimate)
- Oil prices soared to close to $120/barrel at peak
- Several Gulf refineries supplying Asia have ceased operations
- Asia gets up to 90% of its oil from the Middle East
Source: Reuters
Asian countries, which source as much as 90% of their oil from the Middle East, found their refinery feedstock drying up almost overnight. The cascading effect quickly reached the jet fuel supply chain.
China Pulls the Plug on Fuel Exports
China, the world’s top oil importer, ordered an immediate ban on all March refined fuel exports covering diesel, gasoline, and aviation fuel. The ban, in place at least through the end of March, was driven by Beijing’s effort to pre-empt domestic shortages as its own crude supply from the Gulf tightened.
The scale of what this removes from regional markets is significant. China’s fuel exports totalled $22 billion in 2025, and the country serves as Asia’s fourth-largest exporter of so-called clean fuels after South Korea, India, and Singapore.
Beijing has historically used a quota system to manage fuel exports, acting as a swing supplier when domestic demand dips and export margins are attractive. An outright ban removes that buffer entirely.
CHINA'S ROLE IN ASIA'S FUEL SUPPLY (2025 data)
---------------------------------------------
- China: Asia's 4th largest clean fuel exporter
(after South Korea, India, Singapore)
- China supplied ~33% of Australia's jet fuel
- China supplied ~50% of Philippines' jet fuel
- China supplied ~50% of Bangladesh's fuel
- Total China fuel exports in 2025: $22 billion
Source: Reuters
Kpler analyst Zameer Yusof summed up the problem plainly: “The remaining Asian exporters simply do not have the spare volumes to replicate China’s role as the region’s swing supplier.”
A Regional Domino Effect
China is not alone. Thailand has also banned most exports of refined petroleum products, while South Korea has capped exports at 2025 levels and is weighing further restrictions.
Refiners in India and Japan have grown reluctant to issue export tenders, according to Wood Mackenzie senior analyst Priti Mehta. The consultancy estimates the conflict could force up to 6 million barrels per day of crude run cuts across Asia.
Jet fuel swaps in Asia surged to $163 per barrel on March 17, up sharply from approximately $92 before the Iran war began. Gasoline reached $139.80 per barrel, compared with $79.30 on February 27.
FUEL PRICE SURGE (As of March 17, 2026)
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Jet fuel swaps: $163/bbl (was ~$92 pre-war)
Diesel: $150/bbl (surged in March)
Gasoline: $139.80/bbl (was $79.30 on Feb 27)
Overall jet fuel range (Asia): $150-$200/bbl
(was $85-$90/bbl)
Source: LSEG data via Reuters
Vietnam on the Edge
Vietnam offers the most acute case study of what supply dependency looks like when multiple suppliers restrict exports simultaneously.
The country imports more than two-thirds of its jet fuel, and approximately 60% of those imports come from China and Thailand. With both now restricting outbound shipments, Vietnam’s Civil Aviation Authority (CAAV) warned airlines on March 9 to prepare for potential flight cuts starting in April 2026.
The two major fuel importers serving Vietnamese carriers, Petrolimex and Skypec, told regulators they could only guarantee supply through the end of March. Skypec went further, urging the government to restrict air transport to essential domestic routes if the conflict drags on.
Operating costs for Vietnam Airlines and VietJet have jumped 60 to 70 per cent, prompting Vietnam Airlines to petition the government for tax waivers and United Airlines-style fare adjustments.
Vietnam’s Foreign Minister Le Hoai Trung has formally asked Chinese Foreign Minister Wang Yi for close coordination on energy security. Prime Minister Pham Minh Chinh separately raised the issue with Thailand’s ambassador. Authorities have suggested South Korea, Japan, Brunei, and India as potential replacement sources, though officials acknowledged that sourcing alternatives in the current supply environment will not be straightforward.
Airlines Respond Across the Region
The fuel cost shock is forcing a broad repricing across Asian aviation. Fuel typically accounts for up to 25% of airline operating expenses, and prices have now doubled from pre-war levels.
AIRLINE RESPONSES (as of mid-March 2026)
-----------------------------------------
Cathay Pacific - Fuel surcharges raised on all routes (from Mar 18)
Hong Kong Airlines - Surcharges up 35.2% (from Mar 12)
Air New Zealand - Cut 1,100 flights; fares up NZ$10-NZ$90
Qantas - International fare hikes underway
Thai Airways - Fares raised 10-15%
IndiGo/Air India - Fuel surcharges introduced (from Mar 14)
Vietnam Airlines - Seeking government tax waivers on fuel
SAS - 1,000 flights cancelled in April
Air France - Long-haul round-trip tickets up 50 euros
Delta Air Lines - Projecting $400M increase in Q1 expenses
American Airlines - Full-year forecast under review
Sources: Reuters, Bloomberg
Asian airlines are particularly exposed because they tend to hedge less against fuel price spikes than their counterparts in Europe or the United States. That structural vulnerability is now materializing in real-time across balance sheets.
Emergency Measures and Alternative Supply
The response from importers and governments has been rapid, though not yet sufficient to fully replace Chinese volumes.
The International Energy Agency has ordered its members to release 400 million barrels of emergency oil, the largest coordinated stockpile release in history, surpassing the 182 million barrels released after Russia’s 2022 invasion of Ukraine. Singapore’s inventories of light distillates remain approximately 19% above year-ago levels.
ExxonMobil has already chartered up to three shipments of gasoline from the U.S. Gulf Coast to Australia, an unusual and expensive routing that signals just how far procurement teams are willing to go. India’s export flows are also expected to reorient toward Asia rather than Europe, according to Vortexa head of Asia-Pacific analysis Ivan Mathews.
SUPPLY RESPONSE MEASURES (as of March 2026)
--------------------------------------------
- IEA: 400 million barrel emergency release (record high)
- Singapore light distillate inventory: +19% vs. year ago
- ExxonMobil: Chartering US Gulf Coast fuel shipments to Australia
- India: Diverting more transport fuel exports toward Asia
- Bangladesh: Sent formal letter to China seeking supply assurance
- Vietnam: Diplomatic outreach to China, Thailand, South Korea, India
Sources: Reuters, The Conversation
Australia presents a specific concern for airport and airline planners. The country holds only 29 to 32 days of jet fuel in reserve, per figures from its Department of Industry, Science and Resources, well below the 90-day stockpile obligation for International Energy Agency members. Sydney Airport CEO Scott Charlton confirmed the airport is completely reliant on jet fuel imports, with no domestic refinery capacity serving it.
What Aviation Stakeholders Need to Watch
The immediate pressure point is the end of March 2026, when China’s export ban is formally due to expire. Whether Beijing extends or lifts the restriction will directly determine how quickly alternative supply lines can rebuild inventory at Asia’s major airports.
For procurement leaders and fuel supply managers, the ban reinforces the structural risk of single-country dependency. Countries and carriers that relied on China as a swing supplier now face hard conversations about geographic diversification, strategic reserve targets, and supplier contracts that build in redundancy.
Regulatory authorities across Southeast Asia should closely monitor the CAAV’s April timeline. If Skypec and Petrolimex fail to secure replacement cargoes, grounded aircraft and reduced schedules could become a short-term operational reality rather than a contingency plan.
The Strait of Hormuz disruption and China’s export restriction together reveal how a geopolitical event thousands of kilometres away can transmit fuel risk directly to airport tarmacs across the Asia-Pacific.