Two Huge Export Freezes are Reshaping Energy Markets

Source: Leverage Shares analysis

While India – which acted first – didn’t execute an outright ban, it did redivert export products for internal consumption. Propane and butane, which were exported to petrochemical complexes for use in cracking, are now being used to maximize Liquefied Petroleum Gas (LPG) production for Indian households. The freeze on propane and butane exports also restricts the sale of alkylates, a high-value component used to make “premium” grades of petrol/gasoline. Premium grades of diesel and petrol produced in Indian refineries have historically been used to prop up fuel availability in the U.S. and the European Union. Even when the Trump administration had heightened tariffs on India, imports of these fuels were exempted.

Propane is also used to produce polypropylene (PP), a thermoplastic polymer produced from byproducts of oil refining and natural gas processing, are used to automotive components, medical equipment such as syringes, food containers and luggage, and food packaging. Before Trump’s raised tariff, almost 60% of China’s propane was imported from the US. After retaliatory tariffs were placed on U.S. propane by China, its industries switched to the Middle East. As a result of constrained supply from the Middle East, petrochemical plants are already curbing their production of polymers.

Outside of domestic demand, the Indian government has mandated that excess jet fuel capacities are also similarly being aligned for diversion into supporting local fuel demand. A close examination of export/import volumes is being executed in order to ensure that companies are complying with this order.

Over in China, however, the order passed in March resulted in an immediate and total ban on the export of refined petroleum products for the remainder of the month. Petrol, diesel and jet fuel were immediately affected while additional orders were issued to prioritize domestic heating and LPG over polypropylene production.

The impact was seen immediately in Australia, which imports nearly one-third of its jet fuel from China and a significant portion from India. Airlines in Vietnam and the Philippines have already announced flight cancellations for April due to a lack of physical fuel inventory. Spot prices of PP injection molding grade prices in Europe – particularly France and Germany due to their extensive automotive industry – shot up by nearly 18% within 48 hours while contract prices (i.e. long-dated alternatives) went up 2-3%, suggesting that the market is hopeful that there will be a reversal on the decision after March ends. If there isn’t, however, relying on Indian (or Chinese) exports as an alternative may not be available: both countries have a heavy reliance on the Strait of Hormuz for energy-related commerce.

The trigger behind India’s decision partly had to do with an unforeseen event unrelated to the conflict: on the 23rd of February – a full 5 days before the first strike on Iran was executed – Saudi-based Aramco suspended LPG exports² from its Juaymah terminal following structural damage to its propane and butane delivery system. In 2025, at least 60% ⁠of LPG exports from Juaymah were bound for ⁠India while China received around 15% of the exports. Middle Eastern LPG exports are generally considered more suitable since they have the specific propane-butane mix tailored to the requirements of Indian domestic cylinders used in kitchens. Since Jauymah had to cancel March loading contracts until operations were restored and alternative supplies were hard to come by as most March loading and delivery discussions had largely concluded by that time.

In China’s case, around 15% of its needs were met through Iranian imports – which was in question, given the initiation of hostilities. On the 16th of March, however, U.S. Treasury Secretary confirmed that Iranian oil tankers are being allowed to traverse the Strait of Hormuz saying³, “we’ve let that happen to supply the rest of the world”.

The “South Pars” incident – along with the retaliation from Iran, both of which were focused on energy production infrastructure – upends the transitionary outlook on energy-derived supplies to the rest of the world from two of the world’s largest energy consumers who aren’t major producers in their own right. In its place is injected a substantial amount of uncertainty that ensures a defensive posture for a longer period of time that, in turn, will have a massive impact on the rest of the world.

While the Trump administration stated that a 30-day waiver is being “granted” for the purchase of Russian oil, the fact is that both China and India are powers in their own right that are independent-minded enough to not require American permission; if it’s necessary, purchases will continue well beyond that. However, this will not be the case for other energy consumers in Asia who aren’t producers and are beneficiaries of the U.S. security umbrella such as Japan, Taiwan and South Korea. This will also not be the case with Europe; despite friction during the Trump administration, they have tended to toe the line on many matters.

With regard to gas and gas condensate needs, the focus shifts back to Russia, which is the world’s fourth-largest gas producer. Russia is likely ready to deliver LPG cargoes to China and India via the sea; a nearly-finished LPG terminal at Sovetskaya Gavan on Russia’s Pacific coast has the potential to service much of the Asian market. While the particular customizations needed for LPG consumption by these two countries might not be available, the onus of this part of the process might fall on Indian and Chinese energy firms, which could potentially alter the energy map that hitherto had the Gulf Cooperation Council (GCC) countries in the Middle East in a harmonious and mutually beneficial relationship with China and India. The possibility of a long-term shift in energy relationships is running high in the haze of scenarios currently being considered.

But for Europe and the rest of the Asia-Pacific, it is very likely that a substantial spike in cost of air travel, petrol and diesel, medical supplies and even food would be incident within 30-60 days if India and China continue to restrict the export of energy-derived products to protect their citizens’ needs. The EU had already banned products refined from Russian crude for imports, which effectively restricted about a third of India’s diesel exports to the region. By January 2026, no diesel cargoes were being sent to the EU and the diversion order in India effectively ensures that the EU doesn’t have an emergency supplier – it is mostly (if not wholly) dependent on imports from the U.S.

Spot prices for oil had shot north of $150 and the $200 level was entirely within the realms of likelihood before prices settled down on Friday on the back of assurances from the U.S. that energy facilities will not be targeted. However, futures contracts – which are also comfortably north of $100 – could join with spot contracts and rise into the $130-140 range within a week if energy assets remain in the cross-hairs of any or all combatants involved.

Footnotes:

1. “Exclusive: Iran attacks wipe out 17% of Qatar’s LNG capacity for up to five years, QatarEnergy CEO says”, Reuters, 19 March 2026
2. “Saudi Aramco halts Juaymah LPG exports, disrupting key Asian supply”, The National, 26 February 2026
3. “U.S. is allowing Iranian oil tankers through Strait of Hormuz, says Bessent”, CNBC, 16 March 2026