The 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, higher fuel prices and restrictions on shipping and aviation weigh on consumption across major markets, according to energy analytics firm Kpler.
The projected decline is expected to be concentrated in the second and third quarters of the year, when disruptions to supplies, elevated fuel prices and restrictions on regional shipping and aviation are forecast to have their greatest impact.
Diesel and gasoil are expected to experience the steepest contraction, with demand projected to fall by 500,000 barrels per day. Liquefied petroleum gas (LPG) consumption is forecast to decline by 460,000 barrels per day, while naphtha demand is expected to drop by 350,000 barrels per day.
Global gasoline demand is projected to fall by 330,000 barrels per day, followed by jet fuel and kerosene at 200,000 barrels per day and fuel oil at 120,000 barrels per day.
Kpler attributed the projected losses to a combination of reduced feedstock availability for petrochemical industries, higher retail fuel prices, government conservation measures, airspace closures and the displacement of bunkering activities from key Gulf shipping hubs.
However, the outlook suggests a recovery in 2027, with global refined products demand expected to rebound by approximately 2.5 million barrels per day as trade flows normalise, supplies improve, fuel prices ease and international air travel recovers.
The recovery is expected to vary across markets, with the growing adoption of electric vehicles, liquefied natural gas-powered trucks and the substitution of natural gas for fuel oil in electricity generation likely to limit demand growth in some regions.
Asia is expected to account for much of the decline in LPG consumption, with demand projected to fall by 370,000 barrels per day in 2026. China and India are forecast to record reductions of 230,000 and 100,000 barrels per day, respectively, as reduced Middle Eastern supplies constrain consumption.
China’s petrochemical industry has been particularly exposed to the disruption, with about half of its seaborne LPG imports dependent on trade routes passing through the Strait of Hormuz.
Operating rates at Chinese propane dehydrogenation plants fell below 50 per cent in late April, their lowest level in five years, as feedstock shortages and weaker profit margins forced producers to scale back operations. Production subsequently recovered to about 70 per cent by August as supplies improved.
Chinese LPG demand is expected to increase by 170,000 barrels per day in 2027, supported by improved feedstock availability and additional petrochemical capacity.
India, which obtained more than 90 per cent of its LPG imports from the Middle East before the disruption, introduced measures including rationing deliveries in response to supply constraints.
Although Indian demand is expected to improve in the fourth quarter of 2026, supported by increased imports and the festival season, Kpler projects growth of only 60,000 barrels per day in 2027. The slower recovery is partly attributed to government efforts to expand piped natural gas connections among urban households.
Naphtha consumption is also expected to remain under pressure, particularly in Asia, where petrochemical manufacturers have faced reduced access to imported supplies.
Global naphtha demand is forecast to decline by 350,000 barrels per day in 2026, with Asia accounting for approximately 340,000 barrels per day of the reduction.
Asian seaborne naphtha imports fell by 840,000 barrels per day year-on-year between March and September, reaching approximately 1.7 million barrels per day. Imports from the Middle East dropped by 900,000 barrels per day, while supplies from alternative sources increased by only 60,000 barrels per day.
The shortage forced petrochemical plants to cut production, draw down inventories and, in some cases, declare force majeure. Demand losses peaked in May, when Asian naphtha consumption fell by an estimated 830,000 barrels per day year-on-year.
Kpler expects global naphtha demand to recover by 470,000 barrels per day in 2027, led by China, where consumption is projected to increase by 230,000 barrels per day as supply conditions improve and petrochemical facilities expand production.
Meanwhile, global gasoline demand is expected to decline by 330,000 barrels per day in 2026, largely reflecting higher prices and changing consumption patterns.
China is projected to record the largest reduction, with gasoline consumption falling by 260,000 barrels per day as expensive fuel reinforces the country’s shift towards electric vehicles. Demand is expected to decline by a further 40,000 barrels per day in 2027, even as prices ease.
The United States is forecast to record a 155,000-barrel-per-day decline in gasoline consumption in 2026. Average petrol prices in the country increased by more than 30 per cent year-on-year between March and September, adding to pressure on household spending and fuel consumption.
Other Asian economies, including Australia, Indonesia, the Philippines, Vietnam and Pakistan, have also experienced weaker demand as higher pump prices and government conservation measures affect road transport.
India is expected to be an exception, with gasoline demand forecast to increase by 60,000 barrels per day in 2026, partly because incomplete pass-through of international fuel price increases has shielded consumers from the full impact.
Global gasoline demand is projected to recover by 465,000 barrels per day in 2027, supported by lower fuel prices and economic growth, although China’s structural decline is expected to continue.
Diesel and gasoil markets face an even sharper contraction, with global consumption projected to fall by 500,000 barrels per day in 2026.
Europe is expected to account for 280,000 barrels per day of the decline, while Asia is forecast to lose 220,000 barrels per day.
China’s diesel consumption is projected to fall by 200,000 barrels per day as the increasing use of electric and liquefied natural gas-powered trucks reduces demand for conventional diesel in the road freight sector.
Average diesel prices across the European Union and the United Kingdom rose by 35 per cent year-on-year between March and September, further weakening consumption.
India is again expected to buck the wider trend, with diesel demand projected to increase by approximately 90,000 barrels per day in 2026, supported by economic activity, weaker monsoon conditions and the incomplete transmission of international fuel price increases to retail consumers.
Global diesel demand is forecast to rebound by 540,000 barrels per day in 2027, led by Asia and Africa. However, Europe’s recovery is expected to be limited to 70,000 barrels per day following its projected decline of 280,000 barrels per day in 2026. China’s recovery is forecast at just 60,000 barrels per day.
The aviation sector is also expected to experience significant pressure, with global jet fuel and kerosene demand projected to decline by 200,000 barrels per day in 2026.
The Middle East is expected to account for a reduction of 140,000 barrels per day, while Asia is forecast to record a decline of 70,000 barrels per day. Airspace closures, disruption to major aviation hubs, higher fuel costs and reduced long-haul travel are among the factors affecting consumption.
The declines are expected to be partly offset by increases of 30,000 barrels per day in Europe and 10,000 barrels per day in the United States.
Global jet fuel demand is projected to recover by 400,000 barrels per day in 2027 as airspace restrictions ease, international airlines restore flight capacity and travel activity improves.
Kpler identified the pace of normalisation of shipping through the Strait of Hormuz as the biggest uncertainty in its outlook.
A faster resumption of tanker movements could improve feedstock availability, ease petroleum product prices and accelerate the recovery in consumption. However, renewed disruptions to shipping routes or aviation could prolong the impact of the conflict into 2027.
The projections highlight the wider economic consequences of the US-Iran conflict, with disruptions extending beyond crude oil supplies to affect transportation, manufacturing, petrochemicals and global energy consumption.
