OPIS Insights

Stacy Maphula, European oil markets Editor at OPIS interviewed Jesper Sorensen, global head of alternative fuels and carbon markets at marine fuel provider KPI OceanConnect to discuss the change in bunker fuel flows caused by the U.S.-Iran conflict and the most viable and scalable alternative marine fuels in today’s cost-conscious bunker market.

1) OPIS: How has the conflict between Iran-U.S. impacted bunker availability and pricing?

Sorensen: Energy markets do not operate in isolation from geopolitics, and the closure of the Strait of Hormuz, through which roughly a fifth of global oil flows, has made that abundantly clear. Brent crude for example, traded across a $46/barrel range within weeks of hostilities beginning, ICE gasoil swung more than $400/metric ton in a fortnight, and low sulfur marine gasoil (LSMGO) briefly disappeared from the Singapore spot market entirely.

War affects market conditions regardless of the reserves and seaborne supplies available at the time, and this war has been a reminder that conventional fuel markets can suffer serious disruption to availability, something which tends to be underestimated in calmer periods.

KPI OceanConnect has focused on maintaining supply reliability for its customers, creating flexible sourcing strategies for our clients that help them to manage this risk.

2) OPIS: Has there been any operational constraints due to the conflict?

Sorensen: Operationally, the market has continued to function, but the conflict has introduced additional complexity and periods of disruption across parts of the supply chain. Increased security concerns in and around the Strait of Hormuz have led to tighter vessel monitoring, higher insurance costs, changing trading patterns and, at times, more cautious port and routing decisions by shipowners and operators.

We have also seen occasional supply tightness and increased pressure on logistics in certain regional hubs, particularly during periods of heightened escalation. In response, flexibility and close coordination across suppliers, ports and customers has become even more important.

3) OPIS: Has there been a bunker shortage in any ports in Europe?

Sorensen: Supply tightness has been felt across markets and regions, but in the past few months alternative fuels have held up well in Europe particularly, mitigating problems in conventional fuel supply.

Biofuel and methanol markets have been affected, but price movements have been within a much narrower range and largely decoupled from the specific geopolitical shocks affecting conventional supply. Owners who have diversified into alternative fuels in this period have found themselves better insulated from the kind of acute availability pressure that conventional fuel buyers have had to manage.

4) OPIS: What are the monthly bunker costs for KPI OceanConnect, and how do those compare to before the start of the U.S.-Iran conflict?

Sorensen: Our business model is built around the margin on the trade rather than the absolute price of fuel, so the purchase price itself is not the primary lens through which we operate. However, it is fair to say that elevated fuel costs are being felt all along the marine fuel value chain. The scale of the price movements since the conflict began has created a more complex environment for owners and operators, and that reality is reflected in conversations across the industry.

5) OPIS: Are buyers purchasing smaller quantities and not committing to large volumes due to geopolitical uncertainty?

Sorensen: There is more caution in the market around forward commitments, which is understandable. But there is an argument to be made that owners might be too conservative in one area where the economics have shifted in favor of
alternative fuels.

Biofuel and methanol spreads against conventional fuels have narrowed considerably, and when EU Emissions Trading Scheme (EU ETS) and FuelEU Maritime compliance costs are factored in, alternatives have ranked competitive on an all-in basis during this period. For owners willing to look beyond the short-term, the window to lock in alternative fuels on terms more favorable than at any point in the past eighteen months remains open.

6) OPIS: Once the conflict between the U.S. and Iran ends, what is the outlook for the European and Asian bunker markets in 2026?

Sorensen: It would be premature to speculate on outcomes or timelines, but recovery in conventional fuel markets will not be quick. Disruption of this scale will be felt for a while even after the conflict is resolved. European and Asian bunker markets should expect to navigate elevated prices and availability challenges for some time. Liquefied Natural Gas (LNG) users face a particular challenge: damage to Qatari export infrastructure is a setback with a recovery timeline that will be measured in years rather than months, though significant new U.S. export capacity coming online through 2026 and 2027 will help rebalance availability over time.

More broadly, this period has made a compelling case for fuel diversification. Owners who have incorporated lower-carbon fuels into their strategy will not only be better positioned from a supply resilience standpoint, but they will also have meaningfully reduced their exposure to the growing cost of carbon regulation. That is a strong commercial argument for accelerating the energy transition, not deferring it.

7) OPIS: What does KPI OceanConnect see as the most viable and scalable alternative marine fuel?

Sorensen: We remain fuel agnostic because the right fuel for each vessel will depend heavily on its design, the trade route, regulatory exposure and market conditions. For those looking for an immediate, drop-in solution, biofuels stand out as the most accessible option. Compatibility with existing technology and infrastructure means they enjoy low barriers to entry. The constraint they face is one of scale; availability means biofuels alone cannot meet the full demand of a decarbonizing fleets in the long run.

Recent events in the Middle East, however, have underscored how exposed that supply chain can be to geopolitical disruption at pinch points, highlighting why reliance on a single fuel is not a winning formula. Instead, we firmly believe the future of the industry is multi-fueled. When we speak with clients about alternative fuel strategies, we work within a framework that emphasizes flexibility, to minimize disruption to fuel supply and maintain competitiveness through the energy transition.

8) OPIS: Is the use of biofuels as an alternative fuel a viable way for shipping companies to reduce carbon emissions?

Sorensen: Yes, and the commercial case has strengthened considerably. Recent price movements have narrowed the gap with conventional fuels considerably – in some cases B100 or blends such as B30 marine gasoil (MGO) have traded close to, or even below, conventional gasoil levels. When regulatory compliance costs are factored in, the picture shifts further in favor of biofuels.

Key infrastructure investment for bunkering is in storage, and biofuels are the most accessible alternative fuel available to the industry today. They can be used as a drop-in solution compatible with existing engines and infrastructure, and their commercial case has strengthened considerably in recent months. Price movements have narrowed the gap with conventional fuels and once EU ETS and FuelEU Maritime compliance costs are factored in, biofuels can rank competitive on an all-in basis.

On feedstocks, availability is the structural constraint biofuels face, and it means they cannot single-handedly meet the demand of a decarbonizing global fleet in the long run. That is not a reason to hold back, however, it is a reason to see biofuels as a vital part of a multi-fuel future rather than a silver bullet. The right fuel for each vessel depends on its design, trade routes, regulatory exposure and contemporary market conditions. We always work with clients within a framework that prioritizes flexibility through the energy transition.

Infrastructure will follow demand, and that is where the industry should focus. Investment flows where there is certainty of returns, and the most effective catalyst for developing biofuel bunkering infrastructure is long-term offtake agreements. The window to lock in biofuels on terms more favorable than at any point in the past eighteen months remains open, and as more owners make forward commitments, the infrastructure will follow.