Under the Hormuz shock, Asia's oil product shortage risk is concentrated in naphtha, LPG, and some fuel oil

Overview

This report discusses the rise in market concern over potential oil product shortages after the last tankers that crossed the Strait of Hormuz before the war arrived. Goldman Sachs analyzes the impact of a Hormuz shock on oil product supply, inventories, import substitution, and prices from both country and product perspectives. The core conclusion is that overall shortages remained relatively mild in March, but Asian petrochemical feedstocks such as naphtha and LPG were already in extremely tight supply, and if the blockade persists, several Asian countries could face cross-product shortage pressure in April.

Core views

The report argues that a Hormuz shock will not affect all oil products evenly. Gasoline and diesel can be partly buffered by remaining flows, alternative imports, export restrictions, and domestic inventories, but naphtha, LPG, and fuel oil face a higher risk of scarcity, especially in Asia. Asian countries have low days of inventory and heavy dependence on refined product and crude imports from the Persian Gulf. As imports slow and product inventories are drawn down, China and Japan, which have large strategic petroleum reserves, are better positioned to hedge the shock, while major product exporters such as South Korea and Singapore may respond by restricting product exports.

Analysis framework

The report assesses shortage risk through three channels: first, it measures supply and inventory gaps at the country and product level, including pre-shock refined product inventories, refined product and crude imports from the Persian Gulf, and buffers such as domestic crude refining, non-Gulf imports, and export restrictions; second, it observes wholesale price increases at the country and product level, using price responses in diesel, jet fuel, and other products to capture market tightness and precautionary restocking signals; third, it compiles news and anecdotal evidence, tracking fuel rationing reports and government response measures.

Methodology notes

• Supply stress testCountry-product oil product buffer framework

  Remaining product inventory = initial product inventory + product supply - product demand + net product imports

  This framework places inventories, domestic refining, import sources, export restrictions, and demand on the same ledger to determine how much buffer a given country has for a given oil product.

• Market signalWholesale price response analysis

  Assess oil product tightness using physical prices on a regional hub FOB basis

  The report uses physical prices at regional hubs rather than swap prices, and adjusts for FOB/CIF differences by subtracting global average clean freight rates to see whether price increases reflect current supply tightness or precautionary restocking.

• Event monitoringNews flow and government response tracking

  Count news reports about fuel rationing and government shortage response measures

  The report aggregates country-level reports in Bloomberg about fuel rationing and combines them with government measures to identify signs that shortage pressure is shifting from market prices to real supply constraints.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Naphtha

  High-risk impacted product

  Strengths

  As a petrochemical feedstock with relatively inelastic demand, its price and supply changes can reveal pressure in Asia's petrochemical chain early.

  Weaknesses

  Inventories are low and storage requirements are more complex, making it more sensitive to changes in Persian Gulf supply and regional trade flows.

  Comparison

  Compared with gasoline and diesel, naphtha has weaker substitute buffers, and the report says supply is already at extremely low levels.

  Risks

  If imports remain blocked, shortages of Asian petrochemical feedstocks could become visible more quickly.

• LPG

  High-risk impacted product

  Strengths

  It can serve as an important feedstock for petrochemical and energy uses, so supply tightness would directly affect downstream users.

  Weaknesses

  Inventories are especially low, storage and transport are more complicated, and near-term restocking is difficult.

  Comparison

  Compared with ordinary refined products, LPG has less inventory and less flexibility for substitution.

  Risks

  A supply gap could cause localized extreme tightness and government intervention.

• Diesel

  One of the refined products with the strongest price response

  Strengths

  It can get some buffer through export restrictions, inventories, and alternative flows.

  Weaknesses

  It is affected both by reduced refined product flows and by lower imports of Gulf crude with high diesel yields.

  Comparison

  The report says diesel and jet fuel prices rose by about $130-140/bbl on average globally, or roughly 150%.

  Risks

  If crude import shortages persist, pressure on transport and industrial fuel supply could rise.

• Jet fuel

  One of the refined products with the strongest price response

  Strengths

  Global price signals are clear and can reflect the market's expectations of fuel supply tightness.

  Weaknesses

  Price increases may reflect both real supply tightness and precautionary restocking, so interpretation requires caution.

  Comparison

  Along with diesel, it was among the biggest gainers, with even higher price spikes in Asia.

  Risks

  Aviation fuel costs and supply uncertainty could rise.

• Crude oil

  Upstream shock source and refining supply constraint

  Strengths

  Countries such as China and Japan with large strategic reserves are better able to offset import shocks with inventory releases.

  Weaknesses

  Lower Persian Gulf crude inflows are driving down Asia's net imports and squeezing local product supply.

  Comparison

  Most product shortages remained mild in March, but the end-March drop in net imports shows upstream pressure rising quickly.

  Risks

  If Hormuz remains closed for a long time, the crude supply gap will continue to feed through to local refined product output.

Key data

• Report date2026-04-03The cover shows Commodities Research 3 April 2026 | 9:32 PM EDT.
• Asia sample demand shareabout one-third of global refined product demandThe report says the Asian sample countries account for about one-third of global refined product demand.
• Asia dependence on Persian Gulf supplytypically about half of refined product supplySouth Korea and Singapore depend on Persian Gulf refined product supply for nearly three-quarters, including crude oil imported and processed into products.
• Pre-shock inventory comparisonAsia excluding China: about one month, Europe: about 50 daysIn the sample, Asian countries typically held fewer days of refined product inventory than Europe, and naphtha and LPG inventories were especially low.
• Change in Asia net importsdown 9 mb/d by end-MarchBy comparison, the March average was down 1.4 mb/d, showing that the external supply shock widened quickly.
• Change in diesel and jet fuel pricesabout $130-140/bbl, roughly 150%The report says diesel and jet fuel posted the largest price gains, with sharper spikes in Asia.

Impact & implications

For investment and macro judgment, the report points to a transmission chain from shipping disruption to product-level shortages: lower crude imports first squeeze local refining supply, then declining product inventories and export restrictions reshape regional trade flows. Price increases reflect not only genuine shortages but also precautionary restocking by wealthy countries and countries not directly hit by the shock. If the Hormuz closure lasts longer, policy intervention, trade rerouting, and price volatility in Asia's petrochemical chain and transport fuel supply could intensify further.

Risks

• If the Strait of Hormuz remains effectively closed, Asian countries' refined product and crude import buffers may be further depleted.
• Naphtha, LPG, and fuel oil inventories are low and pose a risk of localized extreme tightness.
• Rapid increases in diesel and jet fuel prices could amplify inflation, transport costs, and restocking behavior.
• Government rationing, export restrictions, and trade rerouting may ease domestic shortages, but they will shift pressure to trading partners.
• Price signals may mix real shortages with precautionary restocking, leading to a distorted view of shortage severity.

What to watch

• How long the Strait of Hormuz remains effectively closed and the subsequent tanker arrival pace.
• Whether Asia's net refined product and crude imports continue to run below the 2025 average.
• Signals of strategic petroleum reserve releases or refining adjustments in China and Japan.
• Whether major product exporters such as South Korea and Singapore restrict refined product exports.
• Changes in regional spot prices and FOB/CIF spreads for diesel, jet fuel, naphtha, and LPG.
• Fuel rationing news and government response measures in Thailand, India, Australia, the Philippines, South Korea, and other countries.