Brazilian oil emerges as 'big winner' amid Iran tensions

China and India are increasingly turning to Brazilian oil imports to compensate for disrupted supply, as fallout from the US-Israel war on Iran continues to stall energy trade through the Strait of Hormuz.

With oil harder to access and Russian supply constrained by sanctions, Asian buyers are scrambling for crude from suppliers seen as safer and more reliable. Brazil, one of the world's largest oil exporters, has emerged as one of the most apparent beneficiaries.

“The disruption from the Iran war and the closure of the Strait of Hormuz has heightened Brazil's importance as a marginal crude supplier to Asia. China and India in particular have boosted Brazilian crude purchases to secure barrels unaffected by Gulf shipping disruptions,” said Sumit Ritolia, oil market analyst at consultancy Kpler.

Analysts note that Brazil cannot replace the Middle East as Asia's primary oil supplier. However, as Gulf shipping risks rise—due to Iran's closure of the Strait of Hormuz and a US naval blockade of Iranian ports—Brazilian crude is becoming increasingly attractive to refineries seeking to dodge supply shocks.

Kpler data shows Asian countries imported about 1.2 million barrels per day (bpd) of Brazilian crude in 2025. That figure rose to roughly 1.8 million bpd from January to May this year, reflecting Brazil's growing role in Asia's push to diversify supply away from the Gulf.

How has Brazil's oil export output increased?

Brazil's oil output was already rising before Middle East tensions escalated, thanks to major offshore projects. According to Kpler, Brazil's oil output in 2025 stood at about 3.77 million bpd. From January to May this year, that averaged 4.06 million bpd, with May alone reaching 4.11 million bpd.

However, Ritolia cautioned that the increase is not purely due to a wartime production surge. “Since March 2026, output has increased only modestly by about 50,000 to 100,000 bpd, indicating limited short-term flexibility to quickly ramp up supply in response to global disruptions.”

The real difference lies in where Brazilian oil is directed. State-owned Petrobras has diverted exports to Asia, where refineries pay a premium for crude that bypasses the Gulf. Over 60% of Petrobras' exports now go to China, while exports to the US have dropped to zero from 60,000 bpd in March, according to oilprice.com.

This shift is starting to benefit Brazil's economy. The OECD reported in March that higher oil prices are expected to support Brazil's trade balance, while Brazil's Finance Ministry estimates Brent at $100 per barrel would generate revenue equivalent to nearly 1% of GDP, above current budget forecasts for 2026.

Who is buying more Brazilian oil?

Demand from China is the main driver of Brazil's crude exports. According to Kpler, China's Brazilian crude imports averaged about 1.316 million bpd from January to May this year, compared to around 704,000 bpd in 2025. In value terms, official data compiled by the Brazil-China Business Council shows Brazilian crude exports to China surged nearly 95% to $7.2 billion in the first quarter of this year.

India has also ramped up purchases, with imports averaging about 238,000 bpd from January to May, up from roughly 100,000 bpd in 2025. In April, Brazil became India's fourth-largest crude supplier.

Ritolia said: “China, India and other Asian nations need alternatives that avoid the Strait of Hormuz, are politically safe, and available. Medium-sweet crudes from Brazil's pre-salt fields suit many Asian refineries, and Asian buyers are competing for barrels free of Gulf shipping risks.”

India's demand is also driven by rising domestic fuel consumption, contrasting with China's rapid shift to electric vehicles. India has less capacity to absorb a prolonged disruption via strategic reserves, so refineries have a stronger incentive to secure supply if it is available and profitable.

Beyond China and India?

Brazil is also seeking to strengthen energy ties with other Asian nations. Foreign Minister Mauro Vieira said last week that Brazil is “ready to contribute to Japan's energy security” through increased crude exports, noting that Petrobras is willing to expand its presence there.

The statement comes as Brazil ramps up diplomatic and economic efforts across Asia, including with South Korea, Japan and Southeast Asian nations. Earlier this year, President Luiz Inacio Lula da Silva visited South Korea, where the two countries agreed to upgrade bilateral ties to a “strategic partnership” and signed a series of deals to expand trade and economic cooperation.

Analysts say that with the Strait of Hormuz still partially blocked, Brazil has become far more strategically valuable beyond the Americas, at least for now.

Is Brazilian oil a good substitute for Gulf oil?

Brazil's two main export grades—Tupi and Buzios—are considered medium-sweet crudes with relatively low sulfur content, efficiently processed into fuels like diesel and jet fuel. This makes them attractive to Asian refineries amid tight global supply.

US President Donald Trump is also promoting Venezuelan oil to other countries, but it is a heavy, sour crude that many Asian refineries cannot process. Washington effectively took control of Venezuela's oil industry after the US forces' January kidnapping of former President Nicolas Maduro from Caracas.

Brazilian oil offers supply security for China; for India, it also improves refinery economics as domestic fuel demand continues to rise. However, while Brazilian oil is higher quality and more suitable for Asian refineries than Venezuelan crude, it is still not a perfect substitute for Gulf oil.

“Brazilian crude can replace some medium-sweet barrels from the Gulf and reduce dependence on the Strait of Hormuz, especially for China and India. But it is not an equivalent substitute for all Gulf crudes,” Ritolia said.

What other barriers face Brazilian oil?

Geographic distance is a major challenge for Brazilian crude exports to Asia. Shipping crude from Brazil to China can take about 50 days—far longer than Gulf routes—raising transport costs and tying up tankers in an already tight freight market.

Russia could become a stronger competitor later this year, with seasonal Arctic shipping routes opening. Cargoes from Russia's Arctic ports to China can take nearly half the time of the Brazil-China route.

Last week, the US announced a 30-day extension of sanctions waivers for Russian oil and petroleum products loaded on tankers at sea. This could make floating Russian crude more attractive to Asian buyers in the coming months.

“Brazil helps diversify Asian crude imports, but its role as a replacement supplier is limited by overall Brazilian crude output growth, shipping economics, and competition from European and US buyers,” Ritolia concluded. “Therefore, Brazil is a meaningful marginal alternative for Asia during supply disruptions, but is unlikely to become a structural substitute for Middle Eastern crude in the long term.”