US-Iran Conflict to Cut Global Refined Fuel Demand by 2.4 Million Barrels Daily

The ongoing US-Iran conflict is expected to reduce global demand for refined petroleum products by 2.4 million barrels per day in 2026, as supply disruptions, rising fuel prices and restrictions on shipping and aviation weigh on consumption.

The projection was contained in an October 22 report by energy analytics firm Kpler, which said the decline would be concentrated in the second and third quarters of the year.

Diesel and gasoil are expected to record the largest reduction, with demand projected to fall by 500,000 barrels per day. Liquefied petroleum gas (LPG) demand is forecast to decline by 460,000 barrels per day, while naphtha consumption is expected to drop by 350,000 barrels per day.

Global gasoline demand is projected to fall by 330,000 barrels per day, while jet fuel and kerosene demand could decline by 200,000 barrels per day. Fuel oil demand is expected to decrease by 120,000 barrels per day.

Kpler attributed the decline to reduced feedstock supplies for petrochemical plants, higher retail fuel prices, conservation measures, airspace closures and disruptions to shipping activity in key Gulf hubs.

The firm expects refined-product demand to rebound by about 2.5 million barrels per day in 2027 as trade flows normalise, supplies improve and fuel prices ease. However, the recovery is expected to vary across regions and products, with the growing use of electric vehicles and alternative fuels limiting demand in some markets.

The pace of recovery will largely depend on the normalisation of shipping through the Strait of Hormuz and the easing of regional disruptions.