Biofuels in the Storm: How the Hormuz Crisis is Redrawing the Energy Map for Shipping
Analysis by Jocelyn (Josie) Hansen
“In the middle of every difficulty lies opportunity.” Albert Einstein
When Iran’s IRGC announced the effective closure of the Strait of Hormuz in late February 2026, the world’s logistics industry confronted (again) a crisis with no modern precedent. Oil prices surpassed $126 per barrel. The Red Sea, already the scene of Houthi attacks, offers no viable alternative. For the first time in history, both of the Middle East’s major maritime corridors were simultaneously inaccessible. In the chaos, however, a structural opportunity has begun to crystallise: biofuels are emerging as a strategic necessity for shipping.
The economics have shifted overnight
For years, regulatory pressure has driven biofuel adoption in shipping. As biofuels commanded a premium over conventional marine fuel, then carriers absorbed that cost as a compliance burden. The economics were secondary.
The Hormuz closure has inverted that calculus. With Brent crude surging toward $126 per barrel and US diesel prices jumping 38% in a single month, the price gap between fossils and crop-based has narrowed dramatically. The palm oil-gasoil spread reached its most attractive level in years. On March 9th alone, palm oil futures surged nearly 10%. Biofuels haven’t got cheaper. Fossil fuels have just got dramatically more expensive. For the shipowner, the outcome is the same.
Regulatory and market tailwinds converge
The crisis coincided with the EU Deforestation Regulation and the EU ETS coming into full effect, creating a powerful double signal. On one hand, European operators are scrambling for certified, deforestation-free biofuel feedstocks and EU ETS now includes methane and nitrogen into the CO2e calculations.
On the other hand, the FuelEU Maritime framework now doubles as a financial incentive. Shipowners who over-comply on biofuel blending mandates in 2026 can roll excess compliance credits into future periods. In a market where biofuel economics may remain attractive for months or years, locking in those credits today is commercially astute.
The limits of the opportunity
It would be misleading to present biofuels as a solution to the scale of the Hormuz disruption. The strait facilitates roughly 20% of global oil and LNG flows. No biofuel supply chain can substitute for that volume in any meaningful timeframe.
The opportunity is embedded in the structural irony. The same crisis that makes biofuels attractive has imperilled their feedstock supply chains. Approximately one-third of global fertiliser trade transits the Strait of Hormuz. Urea prices have already spiked, threatening yields of corn, soy, and rapeseed (down 5–15% for soybean, 40–50% for others). These form the backbone of first-generation biofuel production, as waste-based alternative supply is structurally limited.
Strategic implications for shipping:
This biofuel window is narrow but real. Priorities include securing long-term biofuel supply contracts now while the market is adjusting; prioritising waste-based feedstocks to meet EUDR compliance and sidestep agricultural disruption; and over-complying on FuelEU mandates to bank credits as an asset against future regulatory uncertainty.
Conclusion: crisis as accelerant
The Hormuz closure has done in weeks what years of carbon pricing struggled to achieve: it has made the commercial case for biofuels self-evident. The crisis will eventually resolve, oil prices will retreat, and some urgency will dissipate. The strategic question for operators is not whether to adopt biofuels during the crisis, the economics largely answer that, but whether to use it as a forcing function to build the supply relationships and infrastructure that will endure long after the Strait reopens.
Volatility rewards those who prepare for it. The window is open. It will not remain so indefinitely.
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