Indian Refiners Hold Jet Fuel Prices as Hormuz Disruption Bites

Indian Refiners Hold Jet Fuel Prices as Hormuz Disruption Bites New Delhi says aviation fuel would have risen more than 100% without intervention, as the Strait of Hormuz closure squeezes refiners already losing geopolitical flexibility. New Delhi has said domestic aviation fuel prices would have climbed "by more than 100%" had refiners passed through the full cost of the Strait of Hormuz disruption, according to commentary reported on (2026-05-20). The figure is the clearest official measure yet of how far Indian pump prices have been held below the underlying market.⁴ That matters because the gap is being absorbed by refiners, not consumers. Indian processors have long traded on geopolitical flexibility, buying discounted Russian crude when much of the world would not. The Gulf war has eroded that edge, and both the conflict and the government are now depleting margins, according to the Economist's reporting on (2026-05-17).⁷ The pressure traces to the de facto closure of the Strait of Hormuz after military action in the Middle East on February 28. Roughly one-fifth of global oil consumption, about 20 million barrels a day, normally moves through the passage, oilprice.com reported on (2026-05-20). For India the exposure runs deeper than crude.^2,1 About 90% of India's LPG imports, the cooking fuel millions of households depend on, transit Hormuz, according to the same report. Over 40% of India's fertilizer imports come from the Middle East, and around 30% of the global fertilizer trade normally passes through the strait. A price freeze on jet fuel sits inside a much wider import shock.² Jet fuel is where the squeeze shows most directly in traded markets. European spot premiums for jet fuel have fallen to their lowest since the US-Iran conflict began, down to a $99 per metric tonne premium over ICE gasoil futures, according to Argus data cited on (2026-05-20). That softening in Europe sits oddly against the Indian story, and it points to demand destruction as much as easing supply.⁵ The Economist warned on (2026-05-19) that airlines are grappling with dwindling jet fuel supplies, with buffers varying widely by country. Europe holds 38 days of commercial stock, rising to 57 once government reserves are counted. Britain, with no strategic reserve, now holds just 29 days of jet fuel, according to Goldman Sachs.⁶ India's choice to freeze rather than ration follows a different logic. Holding the price protects passenger demand and shields airlines from a sudden fuel shock, but it transfers the cost onto refiner balance sheets already thinned by the loss of cheap Russian barrels.^7,4 The refining math is unforgiving when product cracks move this fast. January diesel contracts on London's ICE settled at $967.50 a metric tonne on Thursday (2026-05-14), up 4.7% on the week, partly on supply worries, hydrocarbonprocessing.com reported. Distillate and jet markets tend to move together, and a refiner absorbing a frozen jet price while diesel cracks blow out faces a widening gap between input cost and regulated output.³ The wider product market is tightening at the same time. Europe's largest independent refiner, Petroplus, announced the closure of three of its five refineries on Friday (2026-05-15) as banks froze more than $2 billion of its credit lines, hydrocarbonprocessing.com reported. Output from 667,000 barrels a day of capacity has already stopped.³ That removes supply from the Atlantic basin and pulls more barrels toward Europe. Europe was the destination for 48.4% of US distillate exports in October, up from 43.5% a year earlier, according to EIA data cited in the same report. US refiners may profit as more customers compete for their fuel, said Sander Cohen of ESAI. Higher global product prices make India's freeze more expensive to hold.³ The signals across the chain run bearish for refiner margins and one-directional. Of fifteen tracked signals, the weight sits almost entirely on the bearish side. Indian refiners are caught between a regulated output price and an input market still pricing the Hormuz risk premium.⁷ The unresolved question is how long the freeze holds. A government can suppress the pump price, but it cannot suppress the crack spread, and someone pays the difference. Watch whether Indian refiners begin cutting runs or seeking compensation, and whether European jet premiums keep falling even as the supply story stays tight. The two cannot both be right for long.^4,5