Imports of fertiliser from the Persian Gulf and fuel from South Korea slumped in March as the Iran conflict wreaked havoc on global shipping routes, although Australia was able to offset much of the disruption by tapping alternative suppliers across Asia, Canada and Saudi Arabia.
But analysts warn a prolonged closure of the Strait of Hormuz will increasingly choke global fuel and fertiliser supplies, driving further price spikes and intensifying competition for alternative cargoes.
Trade data covering the first full month of the Middle East conflict reveals a major reshaping of Australia’s trade flows, as businesses scrambled to secure alternative supplies of fuel and fertiliser amid fears the disruption in the strait could drag on for months.
Despite fears of energy shortages, crude oil import volumes increased by 41 per cent in March, according to figures from the Australian Bureau of Statistics. Imports from Malaysia – Australia’s largest crude supplier – almost tripled, while purchases from Vietnam jumped 120 per cent and supplies from Argentina doubled.
Petrol import volumes also jumped almost 20 per cent, thanks to a rise in shipments from Singapore, Australia’s top supplier of refined fuel.
JP Morgan economist Tom Ryan said the gains in crude and petrol suggested some inventory front-loading ahead of anticipated further supply disruptions.
The Albanese government has tried to shore up Australia’s fuel imports by engaging neighbouring countries that produce refined fuels but also rely on Australian LNG, with Prime Minister Anthony Albanese last month visiting Singapore, Malaysia and Brunei.
Despite the government’s efforts to keep fuel flowing, diesel import volumes dropped 12 per cent in March and jet fuel imports fell 7 per cent, predominantly due to the South Korean government’s strict measures to curb energy exports, introduced on March 13. The rules cap South Korean fuel exports at 2025 levels to stop local exporters from diverting supply to the more profitable international market.
The curbs were partially offset by a strong increase in diesel and jet fuel imports from Malaysia which, according to comments from its Prime Minister Anwar Ibrahim last month, considers Australia a priority market for its state-owned petroleum giant Petronas.
AMP chief economist Shane Oliver said the increase in petrol and crude imports in March reflected the efforts of the federal government to secure more fuel, but that did not mean Australia could relax.
“For most of March, the ships were still arriving, and the problem of shortages is ahead – if you see more countries like South Korea imposing restrictions, that’s when you run into problems,” Oliver said.
During the oil shocks in the 1970s, Oliver said it took several months for the full effect of the shock to show up in energy prices and to damage economic activity.
“The complication at present is that when we came into this crisis, global stockpiles were quite high and we’ve been able to get by running down reserves – not so much in Australia, but in other countries,” Oliver said.
“In other words, it could still be several months away before we see the full impact, assuming the Strait of Hormuz remains closed.”
Beyond fuel, the conflict has also heightened concerns about fertiliser supplies. Australia imports about 95 per cent of its urea – a nitrogen-based fertiliser – and roughly two-thirds of those imports come from the Middle East.
While the value of fertiliser imports from the United Arab Emirates more than halved to $24.4 million in March, according to figures from the Department of Foreign Affairs and Trade, the decline was more than offset by an almost ninefold increase in purchases from Canada and a doubling in imports from Saudi Arabia.
Saudi Arabia has managed to keep some fertiliser exports flowing via Red Sea shipping routes despite the closure of the strait, although shipments remain heavily constrained and well below normal volumes, contributing to a sharp rise in global prices.
Overall, the value of Australia’s imports of crude and non-crude fertilisers jumped 41 per cent in March to $682.3 million, although the increase also reflected soaring global fertiliser prices.
Westpac economist Ryan Wells said there was likely to be continued extreme volatility in Australian energy imports over the coming months as authorities aimed to secure inventory.
Extracted in full from: https://www.afr.com/policy/foreign-affairs/first-data-shows-iran-war-reshaping-fuel-supplies-20260511-p5zvl0
