The US-Iran conflict is expected to reduce global refined petroleum products demand by 2.4 million barrels per day before the end of 2026, as supply disruptions, rising fuel prices and restrictions on shipping and aviation weigh on consumption across major markets.

The decline was expected to be concentrated in the second and third quarters of the year, when disruptions to supplies, elevated pump prices and restrictions on regional shipping and aviation had their greatest impact, according to projections by Kpler.

The outlook shows that gasoil and diesel will suffer the largest decline among refined products, with demand projected to fall by 500,000 barrels per day this year. Liquefied petroleum gas (cooking gas) demand is expected to drop by 460,000 barrels per day, while naphtha consumption will decline by 350,000 barrels per day.

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

The report attributed the demand losses to different effects of the conflict, including reduced feedstock availability for petrochemical plants, higher retail fuel prices, government-led conservation measures, airspace closures and the displacement of bunkering activity from key Gulf hubs.

While the disruption is expected to ease gradually, the report projects that refined products demand will rebound by around 2.5 million barrels per day in 2027 as trade flows normalise, feedstock availability improves, fuel prices ease and air travel recovers.

However, the recovery is expected to vary across products and regions, with the growing adoption of electric vehicles, the use of liquefied natural gas in trucks and the substitution of gas for fuel oil in power generation limiting the return of demand in some markets.

In the LPG market, Asia is expected to account for most of the decline, with demand projected to fall by 370,000 barrels per day in 2026.

China and India are forecast to record declines of 230,000 barrels per day and 100,000 barrels per day, respectively, as reduced supplies from the Middle East constrain consumption.

China’s petrochemical industry has been particularly affected by the disruption, as about half of its seaborne LPG imports are exposed to trade routes through the Strait of Hormuz.

The report noted that operating rates at Chinese propane dehydrogenation plants fell below 50 per cent in late April, their lowest level in five years, as feedstock availability tightened and margins deteriorated. Operations subsequently recovered to about 70 per cent by August as supplies improved and plants gradually resumed production.

Chinese LPG demand is projected to rise by 170,000 barrels per day in 2027 as feedstock availability improves and additional petrochemical capacity comes on stream.

India, which sourced more than 90 per cent of its LPG imports from the Middle East before the disruption, introduced measures including rationing LPG deliveries in response to the supply shock.

Although demand is expected to recover during the fourth quarter of 2026, supported by higher imports and the festival season, the report forecasts an increase of only 60,000 barrels per day in Indian LPG demand in 2027. It attributed part of the prolonged weakness to the government’s promotion of piped natural gas connections among urban households.

Naphtha demand is also expected to suffer heavily from reduced supplies to Asian petrochemical plants. Global consumption is forecast to decline by 350,000 barrels per day in 2026, with Asia accounting for about 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 to approximately 1.7 million barrels per day. Imports from the Middle East dropped by 900,000 barrels per day, while supplies from other sources increased by only 60,000 barrels per day to 1.03 million barrels per day.

The shortage forced petrochemical plants to reduce 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 supplies improve and petrochemical plants increase production.

However, the recovery in Japan and South Korea is expected to remain limited because of competition from new Chinese capacity and the planned closure or rationalisation of less competitive petrochemical plants.

The report also identified higher prices as a major factor behind weakening petrol demand, with global consumption projected to fall by 330,000 barrels per day in 2026.

China is expected to record the largest decline, with petrol demand falling by 260,000 barrels per day as higher prices reinforce the shift towards electric vehicles. Consumption in the country is forecast to decline by another 40,000 barrels per day in 2027, even as fuel prices ease.

The United States is projected to record a 155,000-barrel-per-day decline in gasoline demand in 2026. The report said average American petrol prices rose by more than 30 per cent year-on-year between March and September, worsening the contraction from the second quarter.

Other Asian markets, including Australia, Indonesia, the Philippines, Vietnam and Pakistan, have also recorded weaker demand as higher pump prices and conservation measures weigh on road-fuel consumption.

India is an exception, with petrol demand forecast to rise by 60,000 barrels per day in 2026 because incomplete price pass-through has shielded consumers from much of the increase in international fuel costs.

Global petrol demand is expected to rebound by 465,000 barrels per day in 2027, supported by lower fuel prices and economic growth, although China’s structural decline is expected to persist.

Diesel demand faces an even larger contraction. Global gasoil and diesel consumption is projected to fall by 500,000 barrels per day in 2026, making it the worst-performing refined product in the forecast.

Europe is expected to account for a decline of 280,000 barrels per day, while Asia is projected to lose 220,000 barrels per day. In China, diesel demand is forecast to drop by 200,000 barrels per day as the growing use of liquefied natural gas and electric trucks reduces the amount of diesel consumed in road freight.

The report said average diesel prices across the European Union and the United Kingdom rose by 35 per cent year-on-year between March and September, adding pressure to consumption.

India is again expected to buck the trend, with diesel demand projected to increase by about 90,000 barrels per day in 2026, supported by economic activity, weaker monsoon conditions and incomplete retail price pass-through.

Global diesel demand is forecast to recover by 540,000 barrels per day in 2027, led by Asia and Africa. However, Europe is expected to regain only 70,000 barrels per day following its projected 280,000-barrel-per-day decline in 2026, while China’s recovery is forecast at just 60,000 barrels per day.

Jet fuel and kerosene demand is projected to decline by 200,000 barrels per day globally in 2026. The Middle East accounts for a reduction of 140,000 barrels per day, while Asia is expected to record a 70,000-barrel-per-day decline, reflecting airspace closures, disruption to aviation hubs, higher fuel costs and reduced long-haul travel.

The losses are partly offset by projected increases of 30,000 barrels per day in Europe and 10,000 barrels per day in the United States.

Global jet fuel demand is expected to rebound by 400,000 barrels per day in 2027 as airspace restrictions ease, foreign airlines restore capacity and travel activity improves.

The report identified the pace of normalisation through the Strait of Hormuz as the main uncertainty in the outlook. A faster recovery in tanker movements would improve feedstock supplies, ease product prices and accelerate the rebound in consumption, while renewed shipping or aviation disruptions could prolong the losses into 2027.