Supply and policy

The world's most important oil chokepoint, and why its closure on 28 February 2026 triggered this crisis. Transit has since partially resumed but remains contested. This is the full explainer, absorbed from /fuel-supply where only a two-sentence summary now appears.

20%

Of world oil consumption (EIA)

20M

Barrels/day transit (EIA 2024)

33km

Width at narrowest point

5

Nations bordering the strait

Where Australia's refined fuel comes from now

2026 crisis-era, against the FY2024-25 DCCEEW baseline.

Malaysia and South Korea have absorbed most of the capacity previously sourced from Singapore, China, the Middle East, Japan, and India.

The pre-crisis eight-country baseline

Shares are from the DCCEEW Australian Petroleum Statistics for FY2024-25, the most recent full year of official data. Risk ratings are editorial and reflect current conditions, not FY2024-25.

Combined disrupted supply: roughly 13% of the FY2024-25 baseline (China and Middle East flows) was heavily curtailed through the 2026 crisis. Middle East flows are again cut off after the Strait of Hormuz was declared closed on 12 July 2026, while China's export curbs remain largely in force and are easing only slightly; the crisis-era table above shows where that supply was replaced.

The structural forces behind the shift

• Strait of Hormuz: declared closed: The strait was effectively closed from early March 2026, at the peak taking a large slice of globally traded oil off the market: loadings collapsed from about 20 mb/d to under 4 mb/d and Brent crude spiked to a US$126 high (IEA Oil Market Report, April 2026; EIA, 7 April 2026). A US-Iran memorandum of understanding signed 17 June reopened transit, but the recovery reversed over 6 to 9 July and has since hardened into a declared closure: the IRGC declared the strait closed on 12 July after striking the container ship GFS Galaxy (one crew member killed), Iranian cruise missiles hit three tankers on 14 July (one killed, eight wounded), the US reimposed its naval blockade on Iran on 15 July, and on 16 July US strikes hit an oil tanker near Iran's main export terminal while Iran fired on US bases in Kuwait and Jordan. It escalated again over the weekend of 18 to 19 July: an Iranian attack in Jordan killed two US service members, the US answered with a fresh wave of airstrikes on Qeshm Island and Bandar Abbas running seven consecutive nights, Iran declared the ceasefire effectively collapsed, and on 19 July the IRGC banned all maritime traffic and stopped four vessels, saying no transit permits would be issued while US strikes continue. Traffic has stayed near the floor since: the newest like-for-like PortWatch count is 10 transits on 23 July against a ~88 a day normal, about 11 per cent, with 34 tankers running dark and excluded from that count. Dark running and ship-to-ship transfers off Oman mean true flow may be higher. The major carriers are rerouting via the Cape of Good Hope, hull war-risk cover for a Hormuz transit is quoted at roughly 7.5 to 10 per cent of vessel value against about 0.25 per cent before the war - millions of dollars for a single passage on a large tanker - and the IMO is advising ships to avoid the strait. Two things then broke in opposite directions. On 25 July a Houthi strike burned Saudi Arabia's Jizan refinery and targeted Yanbu - the corridor handling about 92 per cent of Saudi seaborne crude exports and the kingdom's only functioning export route since Hormuz closed - and Brent went back above US$100. Days later it fell to about US$86.6 on 28 July, because Iran and Oman opened talks on reopening the strait's central corridor, with Qatar, Pakistan and Egypt involved and US envoys Steve Witkoff and Jared Kushner attending. That de-escalation has since failed. The talks stalled with the two sides unable to agree, Tehran insisting on maintaining control of the strait; Iran attacked US forces on 28 to 29 July; and US Central Command struck dozens of IRGC sites from 29 July, with the war now drawing in more countries. Brent gave the move back, surging 7.9 per cent on 29 July to trade about US$89.7 to US$92.7 on 30 July. The central route still cannot reopen until deployed naval mines are cleared, and the mine-clearing support offered by the UK, France and others was always conditional on the security situation allowing it, which it no longer does. The crisis-era reshuffle of Australian supply onto Malaysia, Japan, and spot cargoes is now entrenched.
• The Red Sea workaround is now a second front: This force exists because the alternative route failed, and that is a different problem from the closure itself. With Hormuz shut, Saudi Arabia's Red Sea coast became the kingdom's only functioning crude-export corridor, and Yanbu alone handled about 92 per cent of its seaborne crude exports in June. Through late July that corridor was attacked in turn. The Houthis declared a maritime blockade on Saudi Arabia on 20 July and resumed attacks on 22 July, ending a ceasefire that had held since September 2025. On 25 July a missile strike set the Aramco refinery at Jizan ablaze, with five thermal anomalies detected across the complex, and missiles inbound for Yanbu were intercepted. Saudi Arabia suspended Red Sea oil shipments on 26 July after two tankers were hit, saying it would resume once protective procedures were in place. The measured effect is large and is not a sentiment reading: Yanbu loadings fell about 40 per cent after 19 July, from roughly 5.16 to about 3.09 mb/d, and Bab al-Mandeb crude loadings fell 36 per cent in two weeks to a little over 1.2 mb/d. Yanbu berth operations have shifted from predominantly AIS-active to entirely AIS-dark as vessels try to stay off the target list, which means published loading figures now understate true movement and will keep doing so. Suez traffic remains about 60 per cent below pre-crisis. Why this matters to Australian supply specifically: our crisis-era import mix leans on Singapore, South Korea, Japan and India, and those refiners were absorbing the Gulf shortfall partly by drawing crude that routes through this corridor. A chokepoint and its workaround failing at once is not twice the same risk - it removes the assumption underneath every "reroute around it" answer, including ours. The corridor is disrupted rather than closed, which is the distinction this card's amber severity is tracking; it is separated from the Hormuz card because it can recover, or fail, independently of anything Iran does.
• Export curbs and priority clauses: China's refined-fuel export curbs (in force since February 2026) removed a 150-300k MT/month pool from the regional market. Beijing lifted those restrictions for July 2026 and let Zhejiang Petrochemical resume exports after a four-month halt, with scheduled gasoline exports rising above 400k t from a preliminary plan below 40k t, diesel to 600-700k t from about 200k t, and jet fuel to about 1.9 Mt. The lifting has held through July rather than being walked back: refiners are planning about 3 Mt of gasoline, diesel and jet exports for the month, and a second 2026 quota batch of 13 Mt has been issued, taking the year's allocation to 32 Mt, slightly above 2025. The easing is real but conditional: exports still run under allocated quotas skewed to state refiners, with Sinopec and CNPC awarded more than 70 per cent of the first batch, refiners must hold inventories at or above end-February levels, and August policy is still unconfirmed. Thailand and South Korea announced domestic-priority clauses permitting export curbs if local prices spike further. Many spot cargoes carry higher risk premiums.
• Singapore and Japan guarantees: South China Morning Post reported in April 2026 that Australia had secured emergency supply guarantees from Singapore and Japan to steady the top of the import stack. These guarantees have held so far but would be tested if Asian refining utilisation drops further.
• Domestic capacity vs demand: Australia's two remaining refineries (Geelong 120,000 bpd and Lytton 109,000 bpd) combine for 229,000 bpd of nameplate capacity, roughly 23% of national demand. Imported refined product covers the remaining 77%, and the onshore share itself runs mostly on imported crude, so overall import dependence is about 90% and there is no meaningful onshore buffer against a prolonged import disruption. On 28 July 2026 the Commonwealth and Western Australian governments announced a jointly funded $4 million pre-feasibility study into a third refinery, proposed by Perdaman at Karratha, which would be the first large-scale refinery built in Australia since the 1960s. It is a study, not a build: no capacity, cost or timeline has been published and no decision to construct has been taken. Even on the most favourable path a refinery is a multi-year project, so it changes nothing about the position described above, during this crisis or the next one.

A three-source concentration (South Korea 32%, Singapore 23%, Malaysia 23%) in a year of crude feedstock stress is a single geopolitical shock away from another step-change. The pre-crisis eight-country spread offered more shock absorbers than the 2026 bucket shape does.

Announced 12 May 2026: a $3.2 billion Australian Fuel Security Reserve, a $7.5 billion Fuel and Fertiliser Security Facility, a temporary relaxation of the Minimum Stockholding Obligation that secured around one billion extra litres of fuel for the period from March to June 2026, a higher Minimum Stockholding Obligation to lift Australia's reserves of diesel and jet fuel towards 50 days, and doubled ACCC penalties for price exploitation.

• Petrol sulphur cap raised from 10 ppm to 50 ppm. In force from 12 March 2026, extended by the Energy Minister to 30 September 2026. A transitional cap of 40 ppm then applies from 1 October to 31 December 2026, so the 10 ppm standard does not return until 1 January 2027.
• Diesel minimum flash point reduced from 61.5 to 60.5 degrees C. In force from 24 March 2026, also extended to 30 September 2026. Reverts to 61.5 degrees C on 1 October 2026.

Figures verified against primary sources (EIA petroleum chronology and Brent series, RBA historical exchange rates, ABS 6401.0, AIP weekly reports, IEA Oil Market Report April 2026). The 2026 row is also updated from the Wikipedia 2026 Strait of Hormuz crisis timeline, Trading Economics Brent commentary (3 July 2026), and early-July re-escalation coverage (Axios and Al Jazeera 7 July, CNBC 8 July, Reuters 9 July 2026); the 12 July declared closure and re-closure are per straits.live (17 July 2026) and Bloomberg and CNBC (14 to 16 July 2026). Brent was not continuously quoted before the 1980s; the 1973 row uses the posted Saudi Light marker. No forecast implied.