The Red Sea shipping crisis is sending waves through Asia’s fuel markets, hoisting costs even on routes that don’t use the waterway, while spurring sellers to reduce cargo premiums to offset the higher freight.

Rates for shipping products such as gasoline have jumped as some vessels sail longer distances to avoid the Red Sea after attacks by Iran-backed Houthi rebels. That’s tightened the market, first boosting costs of long-distance routes via the Middle East, and now spilling into voyages within Asia.

Global commodity markets — especially for crude oil and related products — are transfixed by the standoff, which worsened in recent days after a fuel-laden tanker operated on behalf of trading giant Trafigura Group was set ablaze by a Houthi missile. The rebel group has been attacking merchant ships in support of Hamas against Israel, prompting retaliatory strikes led by the US.

“The most recent attack on a laden tanker suggests things are getting worse, and not better,” said Anoop Singh, global head of shipping research at Oil Brokerage Ltd. The diversions have added 3% to demand for clean tankers, which carry refined products, and about 1% to dirty-tanker demand, he said.

The cost of shipping 35,000 tons of fuel from South Korea to Singapore jumped almost 50% over the last week to more than $49,000 a day, the highest since 2022, according to Baltic Exchange data. Meanwhile, the cost of larger tankers connecting the Middle East to Japan has hit the highest since 2020.

Given the upsurge in freight costs, there are signs that fuel producers are having to slash cargo prices in order to keep supplies affordable for customers amid lukewarm buying interest for gasoil and jet fuel.

SK Energy Co. sold three gasoil cargoes last week for February-to-March loading at a steeper discount to regional benchmarks, traders said. The refiner also canceled an offer of a jet-fuel cargo due to low bids.

Oil Jumps to November Highs After Another Merchant Ship Attack

Oil rallied to the highest price in two months after a fuel tanker was struck near Yemen, underscoring the geopolitical risks to crude supplies.

West Texas Intermediate rose to top $78 a barrel, the highest price since November. The ship operating on behalf of trading giant Trafigura Group was hit by a missile about 55 miles southeast of Aden, Yemen. Futures for refined products, including diesel and gasoline, also jumped to two-month highs.

Crude climbed more than 6% this week — the biggest gain since the week after the start of the Israel-Hamas war — as positive fundamental news and a push from trading algorithms helped futures surpass key technical levels. Still, the US benchmark settled overbought on its nine-day relative strength index, suggesting the surge may have been overdone.

Crude’s advance has been underpinned by elevated tensions in the Middle East, with the US striking Iran-backed Houthi rebels in Yemen to force them to halt attacks on commercial shipping in the Red Sea. Elsewhere, drone attacks on refineries in Russia endangered crude flows as the war in Ukraine drags on.

Oil has gained more than 8% in January, with additional support from an unexpectedly large drawdown in US inventories and efforts by Chinese policymakers to shore up the economy. Still, many traders remain cautious given prospects for robust supplies from non-OPEC producers, as well as slower demand growth in major importers, including India.