The Trade Zone

The Hormuz shock is stretching jet fuel supply to its limits

The Strait of Hormuz has now been effectively closed for 69 days, and with global jet fuel prices now over US$180 per barrel—roughly double a year ago—the costs are showing up on earnings calls. Delta Air Line’s fuel bill is expected to rise by US$2.5 billion this quarter alone and the company has signalled higher fares and fees to help offset the costs. The disruption has already driven Spirit Airlines into bankruptcy, with the potential for more as prices remain elevated.

By the numbers: more than half of globally traded jet fuel is impacted

• 23% of seaborne jet fuel flows directly through Hormuz, primarily to European markets.

• 40-50% of global jet fuel exports originate from Asia, and those exports are down two-thirds from pre-crisis levels—starved of Middle Eastern feedstock.

• China, a major Asian fuel exporter, reduced exports of jet fuel, diesel, and gasoline exports by as much as 33% in March to safeguard domestic market from disruptions.

• With Europe getting 75% of its jet fuel net imports from the Middle East, the IEA warned in mid-April that parts of the region could run out by the end of May if countries don’t find alternatives

The bigger picture: energy security runs through the refinery as well

As Hormuz illustrates, energy security is not just about who controls the crude and (as is the case with critical minerals) final products matter. Along with China, South Korea and Thailand, which are also major fuel exporters, also capped shipments on most refined fuel exports as countries struggle with Middle East supplies or protect their domestic aviation sectors.

India’s response is instructive. Rather than scrambling for alternative imports, it moved to reduce structural exposure—amending its aviation fuel regulations to allow blending with domestic agricultural feedstock. Energy security and clean fuels became the same policy.

In Canada, an often-cited vulnerability has come to the fore

Canada’s physical exposure to Hormuz is limited, but Ontario and Quebec remain structurally reliant on imported refined petroleum products, of which jet fuel is the largest. That import dependency sits with the U.S., which is more than willing to use energy trade as leverage. The Hormuz crisis revisits a harder question for Canada: what is the right shape of tomorrow’s energy integration with the U.S.?

Sustainable Aviation Fuel (SAF): Where clean and secure meet?

Canada is different from Asia in one important respect: we sit on a lot of feedstock. Oil, of course, but also canola, tallow, and municipal waste, which flow into operating renewable diesel infrastructure, most notably in Strathcona, Alta., through Imperial Oil and Come by Chance refinery in Newfoundland and Labrador, Nfld., (Braya). Yet, Canada produces zero SAF.

SAF accounted for less than 1% of jet fuel consumed globally in 2025. That number is expected to climb to 4% by the end of the decade, according to BloombergNEF. And while energy security has not been part of that growth story, it could be the catalyst, as India proved, that brings new participants to the table. For Canada, that would not just be a domestic resilience argument—but a growing export opportunity for the energy and agricultural sector.​​​​​​​​​​​​​​​​

–Shaz Merwat, Energy Policy Lead

Look what’s trending

The surge in oil prices and another spike in gold exports pushed Canada’s trade balance back into surplus in March.

According to Assistant Chief Economist Nathan Janzen: “Significant trade uncertainty remains with negotiations on CUSMA renewal likely to intensify in coming months, but we continue to expect, as a base-case, that a more stable U.S. tariff backdrop in 2026 (albeit still at significantly higher tariff rates for some products) will leave trade as less of a headwind to growth than it was in 2025.”

Read more in ‘Canadian trade balance back in surplus as energy prices surge’ here.

The week that was

U.S. trade court rejects Trump’s latest global tariff push

• The U.S. Court of International Trade ruled against President Trump’s latest 10% global tariffs, finding the administration improperly used Section 122 of the Trade Act of 1974 to justify broad-based duties tied to trade deficits.

• The decision is another legal setback for the administration’s tariff strategy following earlier rulings against the use of the International Emergency Economic Powers Act (IEEPA). The White House is expected to appeal and find other ways to implement tariffs.

Trump extends EU deadline while new regulatory disputes emerge

• President Trump extended the deadline for the EU to implement elements of last summer’s trade arrangement until July 4, while warning tariffs could further increase if Brussels does not follow through on commitments.

• Separately, major U.S. business groups are pushing Washington to intervene against the EU’s updated Product Liability Directive, arguing new rules around digital products and consumer claims could expose firms to significant litigation risk.

Chinese outbound M&A accelerates

• Chinese overseas mergers and acquisitions reached a five-year high in Q1, totaling US$9.6 billion and marking the fifth consecutive quarter of growth, according to Rhodium Group data.

• The increase comes as Beijing simultaneously tightens controls over inbound foreign acquisitions in strategic sectors, including retroactively blocking Meta’s acquisition of Chinese AI app Manus.

Auto sector pushes for continuity under CUSMA

• Major North American auto industry associations urged the Trump administration to extend CUSMA, warning against splitting the pact into separate bilateral arrangements.

• Industry groups representing GM, Toyota, Tesla, Volkswagen, Hyundai and others argued that separate agreements would increase regulatory complexity and disrupt integrated North American supply chains during a period of rapid technological transition.

Mexico ramps up commercial engagement with Canada ahead of USMCA review

• This week, Mexico launched one of its largest trade missions to Canada in recent memory, bringing more than 240 companies to Toronto and Montreal for over 1,800 business meetings.

• The outreach comes as Ottawa and Mexico City position themselves ahead of the upcoming CUSMA review, though both countries continue to take visibly different approaches to engagement with the Trump administration.

–Thomas Ashcroft, Global Issues Policy Lead