The restriction, imposed last week and expected to remain in place until at least the end of March, aims to prevent domestic shortages in China, the world’s largest oil importer, according to market sources.

The move curtails exports that were valued at about $22 billion last year.War disruptions amplify supply strainEven before the export curbs, Asian refiners were seeking alternative crude supplies as the conflict in the Middle East disrupted flows from the Gulf.

Several refineries in the region, a key supplier of fuel to Asia, have shut operations as shipping through the Strait of Hormuz was halted.

The combined impact has intensified competition for available cargoes, leaving import-dependent economies exposed to supply shocks.

Australia, Bangladesh and the Philippines, which rely heavily on Chinese refined fuel exports, are expected to face immediate challenges in meeting demand.

China accounted for roughly one-third of Australia’s jet fuel imports last year and about half of supplies to Bangladesh and the Philippines in 2024.

China ranks as Asia’s fourth-largest exporter of refined, or “clean,” fuels after South Korea, India and Singapore, and plays a pivotal role as a swing supplier when regional demand fluctuates.

Analysts say the sudden halt in exports leaves limited room for other suppliers to compensate. “The remaining Asian exporters simply do not have the spare volumes to replicate China’s role as the region’s swing supplier,” Kpler analyst Zameer Yusof said.

Benchmark refining margins in Singapore, known as “cracks,” are expected to continue rising as markets adjust through higher-priced replacement cargoes or reduced demand.

Fuel prices across Asia have climbed sharply. Diesel derivatives rose to $150 per barrel on March 17, while jet fuel swaps reached $163 per barrel, up from about $92 before the war, according to LSEG data.

Gasoline traded at $139.80 per barrel on Monday, compared with $79.30 on February 27.The tightening market is already affecting downstream sectors. Vietnam has warned airlines to prepare for potential flight cuts from April due to fuel shortages linked to export restrictions.

China’s Foreign Ministry said on Monday that military action in the Middle East should cease and that Beijing is willing to work with other countries to ensure energy security.

Members of the party’s Middle East crisis economic response task force said the measures aim to stabilise domestic energy supply and prices as shipments of oil and gas to South Korea have been disrupted by the regional conflict affecting the vital maritime corridor.

According to data from the Korea International Trade Association, South Korea depends heavily on energy imports, sourcing about 70% of its crude oil and roughly 20% of its liquefied natural gas (LNG) from the Middle East.

Democratic Party lawmaker Ahn Do-geol said the government would prioritise managing LNG supplies by increasing electricity production from coal and nuclear facilities while scaling back reliance on LNG-fired power generation.

Limits that capped coal power output at 80% of installed capacity will be lifted starting Monday, Ahn said. Maintenance work at six nuclear reactors will also be completed earlier than scheduled to raise the utilisation rate of nuclear plants from the high-60% range to about 80%.

The government on Friday introduced a price ceiling on gasoline of 1,724 won ($1.15) per litre, with adjustments planned every two weeks to reflect changes in global oil markets.

Ahn said gasoline and diesel prices had already declined since the cap was introduced, falling by 58 won and 77 won per litre respectively as of Sunday.

Officials said a supplementary budget would be drafted by the end of the month and submitted to parliament to cushion the economic impact of higher energy costs.

Democratic Party leader Jung Chung-rae said the party would fast-track approval of the budget within 10 days after it is submitted. The proposed spending package is expected to include compensation for refiners linked to the fuel price cap, energy vouchers for households, logistics support for exporters and expanded investment in renewable energy.

The Budget Ministry said no specific date had yet been set for the supplementary budget but that preparations were underway.

Authorities are also considering designating the Yeosu Petrochemical Complex as a special industrial crisis response zone as part of efforts to support industries affected by the energy disruption.