Can the Global Lubricant Market Withstand Rising Geopolitical Volatility?
Geopolitical tensions in the Middle East are once again testing the resilience of global energy supply chains, with the base oil and lubricant sector closely watching developments across the region.
As one of the world’s most critical hubs for base oil production—particularly for high-quality Group II and Group III grades—the Gulf plays a central role in supplying markets across Asia, Europe, and Africa. Any disruption or perceived risk around key shipping corridors such as the Strait of Hormuz quickly reverberates across the global lubricant value chain.
While the industry has not yet seen widespread physical shortages, the current environment is already influencing market behaviour. Freight and insurance costs are fluctuating, price validity periods are tightening, and buyers and suppliers alike are reassessing procurement strategies and inventory planning. In many cases, companies are shifting their focus from pure cost optimisation toward greater supply security and operational resilience.
To understand how the industry is responding to this evolving situation, we spoke with several leaders across the lubricant supply chain. Bhupinder Singh of Bluechem Group, Raza Rajput of United Oil Supply Company, Masood Quraishi of Petrolube Oil Company, and Aamir Irfan of GP Global MAG LLC share their perspectives on how the market is reacting today—from sourcing strategies and pricing pressures to the longer-term question of whether the current crisis could accelerate regional diversification in lubricant production.
Bhupinder Singh, Bluechem Group
1. How is the current US–Iran conflict impacting base oil and lubricant market sentiment in your region?
The immediate impact is not physical shortage but heightened strategic uncertainty across the supply chain.
The Middle East remains the world’s most important export hub for base oils and especially Group III base oils. Any geopolitical tension around the Gulf or the Strait of Hormuz immediately affects sentiment across Europe, Africa and Asia because a significant portion of global base oil trade flows through that corridor.
What we are seeing now is a risk-management response from the market: buyers are becoming more cautious in their commitments; freight and insurance costs are rising, and suppliers are shortening price validity. In other words, the market is temporarily shifting from price optimization to supply security.
Historically, the lubricant industry has proven very resilient to geopolitical shocks, but events like this remind us how interconnected global base oil logistics really are.
2. How are lubricant producers and blenders adapting to this volatility?
Lubricant producers are responding with a combination of operational flexibility and supply chain diversification.
– Companies are expanding their approved base oil slate, allowing them to source Group II or Group III material from multiple regions—Middle East, Asia, Europe or the U.S.—depending on availability.
– Many blenders are adjusting inventory strategies. Carrying a few additional weeks of base oil or additive inventory today is considered a reasonable trade-off to protect production continuity.
– Pricing mechanisms are becoming more dynamic. Instead of fixed price structures over longer periods, many producers are adopting shorter pricing cycles and quicker feedstock pass-through, particularly in markets where crude volatility is high.
In essence, the industry is shifting from a lean supply chain model to a more resilient one.
3. How are crude price fluctuations affecting base oil pricing and margins for lubricant producers today?
Crude remains the primary cost driver for the entire lubricant value chain.
When crude moves sharply, the immediate impact is felt at the refinery level through feedstock and vacuum gas oil pricing, which quickly translates into base oil cost increases. However, finished lubricant prices typically adjust with a lag because many customers operate under supply contracts or competitive market constraints.
That lag can temporarily compress blender margins, particularly in highly competitive markets, where passing through price increases takes time.
At the same time, logistics costs—freight rates, marine insurance premiums, and longer transit routes—are also increasing during periods of geopolitical tension. These factors collectively put pressure on margins across the supply chain.
Companies with strong procurement strategies, diversified sourcing, and disciplined pricing models tend to manage this volatility better than those operating with narrow supply options.
4. Could this crisis accelerate regional self-sufficiency in lubricant production outside the Middle East?
This situation will likely accelerate an ongoing structural shift rather than create a completely new one.
Over the past decade we have already seen significant investments in lubricant blending capacity across India, Southeast Asia, Africa and Eastern Europe. These regions are increasingly focused on building local manufacturing capability to reduce reliance on imports of finished lubricants.
However, complete self-sufficiency is unlikely in the foreseeable future. The Middle East will remain a critical supplier of high-quality base oils, particularly Group III.
What we will likely see instead is a more regionally balanced supply model that includes more blending capacity closer to end markets, broader base oil supplier approval lists, greater investment in storage and logistics infrastructure, and stronger regional supply hubs.
In other words, the industry is not moving toward isolation, but toward greater redundancy and resilience in its supply chains.
Raza Rajput, Director, United Oil Supply Company Ltd(United Group)
1. How is the current US–Iran conflict impacting base oil and lubricant market sentiment in your region?
Market sentiment in the UAE and the wider Gulf has become highly cautious and volatile. The conflict has disrupted shipping and raised concerns about flows through the Strait of Hormuz, a route that normally carries roughly 20% of global oil shipments. Two major effects are the price volatility, and the supply security concerns.
2. How are lubricant producers and blenders adapting to this volatility?
· Increasing procurement from multiple base oil producers in the Gulf and Asia rather than relying on a single supply channel.
· Holding slightly higher safety stocks of base oils and additives.
· New pricing adjustments are being done on shorter term cycles considering the surcharges linked to base oils
3. How are crude price fluctuations affecting base oil pricing and margins for lubricant producers today?
Crude oil is the primary feedstock for base oil production, so the price tends to increase when crude rises, further increasing production cost for lubricants manufacturers. Margin pressure increases because finished lubricant prices cannot always rise as quickly as feedstock costs. As a result, many producers face temporary margin compression, especially in highly competitive export markets
4. Could this crisis accelerate regional self-sufficiency in lubricant production outside the Middle East?
Yes, the crisis could accelerate localization of lubricant production in several regions.
Masood Quraishi, Petrolube Oil Company
1. How is the current US–Iran conflict impacting base oil and lubricant market sentiment in your region?
The current US-Iran conflict has significantly impacted the lubricant manufacturers and marketers in the GCC Region. The UAE – in particular – has been impacted as it exports almost 90% of lubricants across the globe. Considering the port closure and shipping industry disruption, one of the key challenges is to manage the inventory of inbound material. This is a volatile and unprecedented crisis and lubricant manufacturers are coping up to adapt business continuity plans to manage the business .
2, How are lubricant producers and blenders adapting to this volatility — through sourcing diversification, inventory strategies, or pricing adjustments?
This volatility has opened out-of-the-box thinking for lubricant blenders with multiple local sourcing options. Alternate routes for finished products, safety stock instead of just-in-time inventory and executing force majeure clauses/war risk surcharge in contracts are some steps already being taken. All of the above will add up to the pricing adjustment for trade channels as well as the end consumer.
3. How are crude price fluctuations affecting base oil pricing and margins for lubricant producers today?
Base oil prices have a direct association with crude and also depend on other factors like the VGO (Vacuum Gas Oil prices), supply-demand gaps and arbitration within different refining hubs of Asia, Europe and North America. The base oil pricing has increased to almost 15% ever since this crisis started, and considering that Iran is the main source of base oils in the UAE, the risk of increased demand with limited supply for a shorter period of time is higher. This is especially true with the current shipping challenges for vessels to pass through the Strait of Hormuz. This just makes the picture more complex and unclear for the time being.
4. Could this crisis accelerate regional self-sufficiency in lubricant production outside the Middle East?
The region has more than enough capacity to blend lubricants, which is why the UAE is the hub of export for finished lubricants. Regional refineries could start to supply to local blenders using alternate routes as part of a business continuity plan, which will reduce dependency on imports of base oils across the globe. A similar model can be used to set up a base for the additives manufacturing industry in the UAE, so that the whole value chain can align to cope with any crisis or volatile situation. All in all, a business continuity plan for self-sufficiency should be the current aim and strategy.
Aamir Irfan, Director – Sales & Marketing, GP Global MAG LLC (Mag Lubricants)
1. How is the current US–Iran conflict impacting base oil and lubricant market sentiment in your region?
The current situation is an existential crisis for the lubricant industry. Base oil prices have changed by $200/- per tonne since 03 March. We are expecting more surge if the ports remain closed for operation.
2. How are lubricant producers and blenders adapting to this volatility — through sourcing diversification, inventory strategies, or pricing adjustments?
This is a seller’s market. All blenders are running behind stockists or blenders to get their hands on any/whichever variety of base oil.
3. How are crude price fluctuations affecting base oil pricing and margins for lubricant producers today?
Although there is supposed to be a lag between the crude and base oil movement, we see that profiteering minds make the most of such fluctuating times. Margins too are being reworked to manage the crisis on a short-term basis. Price change will ensure BRAND establishment.
4. Could this crisis accelerate regional self-sufficiency in lubricant production outside the Middle East?
It depends a lot on the additive suppliers.