The war in the Middle East has caused significant disruptions in the market for refined petroleum products, affecting not only Asia but also Europe. For the time being, the situation in Europe remains under control, largely thanks to stock levels that provide visibility for around one month. Nevertheless, Europe’s dual reliance on suppliers in the Gulf and Asia calls for caution. Supply status in the European market will be influenced by geopolitical developments in the Gulf and whether Asian producers choose to prioritise supplying their domestic markets.
Market upheavals have resulted in sharp price rises
More than a month after the outbreak of the conflict in the Middle East, the repercussions for the hydrocarbons market are profound: an almost complete halt to flows through the Strait of Hormuz (accounting for around 10% of global crude oil consumption and around 5% of refined products); damage to production capacity in certain Gulf countries (17% of Qatar’s LNG production capacity, which supplies around 20% of the global market, and 43% of the Gulf’s refining capacity have been damaged to varying degrees); and a sharp rise in prices for all products, whether crude or refined.
Refined product inventories in days of consumptionWhile disruptions have so far mainly affected supply flows, the end of the delivery period for shipments from the Gulf region that left before the outbreak of the conflict means that the risk of physical shortages of certain products is growing. This is particularly true for motor fuels among refined products, where price rises are much steeper than those for crude oil. Wholesale gasoline prices have risen across all markets, but the most significant increases have been in diesel and jet fuel, whose supply chains are much more constrained by the ongoing disruptions. Wholesale diesel prices have doubled in Europe and tripled in Asia, while jet fuel prices have doubled in Europe and increased by a factor of 2.5 in Asia. In the United States, the increase has so far been relatively contained, with wholesale prices for these fuels rising by around 50%.
Regardless of the conflict’s trajectory, this precarious situation in the markets is likely to worsen in the coming weeks. Indeed, even in a very optimistic scenario of a swift resolution to the conflict, it is understood that a return to the normal functioning of the hydrocarbon market will be a gradual process, taking several weeks or even several months. In this context, one might wonder about the possibility of a physical disruption to the supply of these refined products in Europe.
European stock levels offer only a temporary solution in the event of a prolonged disruption to supply flows
An initial indication can be found in the stock level available in Europe. For all OECD member countries in Europe, diesel stocks are equivalent to 71 days’ consumption, while jet fuel stocks account for 50 days. However, the diesel stocks in Spain and Portugal only cover around one month’s consumption. The United Kingdom, in particular, raises concerns, as it has some of the lowest diesel and jet fuel stock levels in Europe (20 and 31 days respectively).
The growing dependence on Asia is increasing Europe’s vulnerability
The second factor in the equation is Europe’s dependence on imports of refined products. The evidence is unequivocal: over the past twenty years, there has been a massive shift in refining capacity from Europe to Asia, and to a lesser extent, to the Middle East. Since 2000, European refining capacity has fallen from 22% to 14% of the global total, while in Asia, it has risen from 26% to 36% over the same period. In volume terms, these capacities have fallen by 17% in Europe and risen by 74% in Asia. This trend is largely due to more favourable refining margins in Asia. Given an average 1% increase in European consumption of these products over the same period, Europe’s dependence on imports of refined products has grown.
Refining capacity (volume, index 100=2000)In terms of jet fuel, European dependence is low (4%), whereas it is much higher for diesel (35%). However, similar to the available stocks indicator, this situation varies greatly from country to country. For jet fuel, dependence is high (over 50%) in Denmark, France, Italy and Sweden. As for diesel, France’s dependence is quite significant (38%), and higher than in most other countries. Nevertheless, it is the United Kingdom that stands out here, with a dependence of 76% for jet fuel and 34% for diesel. To make matters worse, Kuwait supplies 38% (in 2024) of the jet fuel imported by the UK, while Asia and the Middle East collectively account for 81% of these imports.
Beyond this overall dependency indicator, it is important to consider Europe’s dependency on Asia as a whole, rather than solely focussing on the Gulf region, in order to better assess its vulnerability. In 2025, Asia and the Middle East supplied 23% of European diesel imports and 90% of jet fuel imports. Given that Asian refineries are heavily dependent on crude oil from the Middle East (over 60% of their imports are sourced from the Middle East) and the sustained growth in the consumption of refined products (an average of +2.5% per year since 2000), tensions in the Asian refined products market are intensifying.
In this context, European imports from Asia are highly vulnerable. Due to the limited availability of Gulf crude oil, some Asian refineries are having to reduce their production rates, and some countries are prioritising domestic consumption over exports. For instance, China virtually halted its fuel exports a few days after the conflict began. Compounding Europe’s vulnerability, the price disparities between Asia and Europe are encouraging shipments from other producing regions to prioritise the Asian market.
No physical constraints at this stage, but visibility is gradually diminishing
Currently, it is very difficult to determine when physical supply issues for diesel and jet fuel will arise in Europe. Disruptions in the refined products market and their impact on the wider economy begin with sharp price rises, which trigger varying degrees of demand adjustments that gradually permeate different segments of this demand based on their level of elasticity. Furthermore, we are seeing instances of demand destruction, driven by political decisions (such as the rationing measures currently in place in some Asian countries) or the temporary suspension of certain activities (a decision already taken by airlines in Asia, which have announced the temporary suspension of their least profitable air routes under current conditions). Finally, the lack of available product is physically constraining demand.
In Europe, we are still at the stage where prices impact demand and government interventions aim to bolster purchasing power. Inflation in the eurozone rose significantly in March (+2.5% y/y compared with +1.9% in February) due to rising energy prices. For the time being, this increase is lower than that recorded during the 2022 energy crisis, and the rebound in core inflation is not expected to occur until the second half of the year. Nevertheless, the fuel market will continue to tighten in the coming weeks, with some experts in the European aviation sector expressing concerns over a lack of visibility regarding fuel availability beyond a 5 to 6-week timeline. However, the rapid deterioration of the situation in Asia could bring this timeline forward.
What are the prospects?
In the short term, European governments will have to strike a delicate balance in their crisis management: they need to act to anticipate shortages, but without triggering panic among consumers, as this would only exacerbate the situation. Two key elements appear crucial to us in this approach: the ability to prioritise needs and the promotion of European solidarity. We have indeed observed significant disparities in levels of vulnerability.
In the medium to long term, it will certainly be necessary to learn lessons from this crisis, and three possible avenues (among others) seem viable. As is often the case when it comes to increasing European energy sovereignty, progress will occur gradually and over an extended period.
- Actions regarding stockpiles may play a positive role, but will only marginally reduce Europe’s vulnerability. If we apply the European standards for energy security – namely, covering 61 days’ consumption through available stocks or 90 days’ net imports – these standards are met for diesel (except in the United Kingdom) and there is some leeway for jet fuels in a number of European countries.
- Only a highly proactive industrial policy, which prioritises economic security (albeit at the expense of decarbonisation efforts) and includes government support, will enable the return of significant production capacity to Europe. Refining is an energy-intensive activity, and the Middle East and Asia enjoy significant comparative advantages, whether due to access to abundant and cheap energy or government policies that favour low-cost energy for industry. For more than twenty years, a comparison of refining margins has consistently shown that Europe is at a disadvantage compared to Asia or the United States.
- The geographical diversification of supply sources (excluding the Middle East and Asia) is rather limited in the short term. Apart from Russia, only the United States has significant production capacity (18% of global capacity in 2024).
Europe’s susceptibility to the vagaries of the refined products market underscores the urgency of pursuing and expediting the low-carbon transition at European level. The electrification of end-use sectors, particularly in transport, appears to be an obvious means of reducing dependence on road fuels, even though this dependence will continue to be considerable in the medium term. Regulatory uncertainties may have slowed this progress towards the electrification of transport, but recent developments seem promising. Furthermore, as we demonstrated in a previous article[1], progress in the low-carbon transition does not necessarily translate into increased energy sovereignty. With regard to aviation fuel, the development of production capacity for sustainable aviation fuels (SAF) is a crucial means of enhancing energy sovereignty, as it relies on local resources (notably biofuels or renewable energy for synthetic fuels). Nevertheless, this is only a viable solution in the long term. Currently, these types of fuel are still very expensive, the technical challenges are significant, and prices are still tied to those of petroleum products.
This article was written with the help of Clara Ngo Ba Do, intern.
