Global diesel supplies could remain tight well into 2027 as the Iran war disrupts fuel exports, reduces refinery output and leaves countries with falling inventories, according to the International Energy Agency (IEA). Global diesel and gasoil exports fell by nearly 700,000 barrels per day year-on-year in September 2026. Combined net exports from Russia and the Middle East dropped by 1.3 million barrels per day to 820,000 barrels per day, more than 60% lower than a year earlier, the IEA said in its Oil Market Report for October 2026. The shortage comes as the global oil market faces a sharp decline in demand due to high fuel prices, restricted availability and a weaker economic outlook. The IEA expects global oil demand to fall by 2.6 million barrels per day on average in 2026, even as supply constraints continue to put pressure on diesel markets. War disruptions increase diesel shortage The conflict in the Middle East has reduced the availability of refined oil products, including diesel and gasoil. Disruptions to exports from the region, along with lower supplies from Russia and parts of Asia, have left the global market struggling to meet demand. Middle Eastern oil exports have recovered more slowly for refined products than for crude oil. Crude exports from Gulf producers rose sharply in September, shipments of refined products from the region remained below half of their pre-war levels. ALSO READGlobal oil demand set for first annual fall since 2020: IEA Crude oil exports from Gulf producers rose by 4.4 million barrels per day to 13.9 million barrels per day in September, reaching more than 75% of pre-war levels. However, the recovery in crude shipments has not translated into a similar increase in supplies of diesel and other refined products. The loss of crude oil flows through the Strait of Hormuz also affected refinery operations in Asia, particularly in China, India and South Korea. Lower refinery activity reduced diesel and gasoil production, adding to supply shortages. Russian supplies have also weakened. Damage to refineries from Ukrainian drone attacks has reduced the country's gasoil production and exports in recent months. These disruptions have limited the availability of diesel at a time when several major importing regions are competing for supplies. Global gasoil and diesel exports averaged 4.7 million barrels per day during the first nine months of 2026, around 10% below the level recorded a year earlier. Exports from the United States and China increased, but the additional volumes were not enough to make up for the losses from Russia and the Middle East. Lower inventories leave markets vulnerable Falling inventories are adding to concerns about the availability of diesel ahead of the Northern Hemisphere winter, when demand for heating typically rises. The IEA said global gasoil markets tightened further in the third quarter of 2026 as prolonged export disruptions forced countries to draw down their stocks. These declines came after unusually large inventory losses in the second quarter, leaving markets with fewer reserves to meet seasonal demand. Stocks held by members of the Organisation for Economic Co-operation and Development (OECD) fell to 565 million barrels in July, 5% below pre-conflict levels and their lowest since November 2023. The decline has left importing countries with less room to manage unexpected supply disruptions. Refinery maintenance is expected to put further pressure on supplies in October, just as seasonal demand begins to rise. High crude oil prices and record tanker freight rates have also reduced refining margins in Europe and Asia. The cost of transporting crude has increased sharply, making it more expensive for refineries to secure supplies. If refining becomes less profitable, some plants in Asia and Europe could reduce production, further tightening the market. The IEA said global oil inventories were 509 million barrels below their end-February levels by the end of September. A decline in onshore stocks was partly offset by an increase in oil held on tankers, but the overall stock position remains a concern. The depletion of inventories is particularly important because stocks act as a buffer when production or trade is disrupted. With fewer reserves available, any further interruption to exports or refinery operations could have a greater impact on prices and fuel availability. Diesel prices add to economic pressure The shortage has pushed diesel prices to record levels in several major markets. Wholesale prices exceeded $200 per barrel in Singapore in mid-September and reached around $220 per barrel in Europe and the United States. Although prices have eased from their peaks, diesel remains expensive compared with crude oil and its pre-conflict levels. Higher fuel costs are increasing the cost of transporting goods and putting pressure on household incomes, economic activity and inflation. Diesel demand has proved more difficult to reduce than demand for some other fuels because it is closely linked to transport and wider economic activity. Trucks, commercial vehicles and several industrial activities depend on diesel, making it difficult for consumers and businesses to switch to alternatives quickly. Government measures to cushion consumers from high prices have also helped keep demand relatively strong. At the same time, high prices have prompted some consumers to delay purchases of heating oil, reducing demand for gasoil used outside the transport sector. ALSO READWhy the world faces a diesel crunch — and how India is filling the gap Global diesel demand fell by 1.1 million barrels per day year-on-year in the second quarter to 28.5 million barrels per day. It declined by a further 750,000 barrels per day in the third quarter to 28.7 million barrels per day. The IEA expects the decline in gasoil demand to accelerate in the fourth quarter. However, the need to replenish heating fuel stocks before winter could put renewed pressure on supplies, even as some consumers reduce purchases in response to higher prices. Supply recovery may not be enough The IEA expects global refinery output to recover towards the end of 2026. This could help return the gasoil and diesel market to a surplus in the first quarter of 2027. However, the expected recovery is unlikely to make up for the supply shortfall accumulated during 2026. The agency expects the market to remain tight well into 2027, with a sustained recovery in supplies from the Middle East playing a key role in easing the shortage. The easing of Russian diesel export restrictions is unlikely to provide significant relief, as the main constraint is the lack of operational refinery capacity rather than restrictions alone. Meanwhile, the United States and China have increased exports, but their additional supplies have not fully offset losses elsewhere. Any further disruption to energy infrastructure, tanker movements or refinery operations could worsen the situation. A delayed recovery in Middle Eastern product exports could also force consumers to cut demand further, with potentially significant economic costs. The IEA has warned that the market's recovery remains uncertain. Although higher refinery output is expected to improve supply in early 2027, this increase will not be sufficient to offset the deficit built up during 2026. The pace of the recovery will depend heavily on the return of refined product supplies from the Middle East. On October 2, G7 leaders announced a commitment to speed up the release of agreed oil supplies under the IEA's collective action, with priority given to making diesel available to the market in the coming weeks. Global oil demand set to fall in 2026 The diesel shortage comes against a downturn in global oil demand. The IEA expects worldwide oil demand to fall by 2.6 million barrels per day in 2026 to 102.4 million barrels per day, with diesel accounting for around a quarter of the decline. Demand is forecast to contract by 2.5 million barrels per day year-on-year in the fourth quarter as high fuel prices, limited product availability and weaker economic conditions weigh on consumption. The agency had already recorded year-on-year declines of 5 million barrels per day in the second quarter and 3.7 million barrels per day in the third quarter. The IEA expects global oil demand to recover by around 2 million barrels per day in 2027. However, this would still leave consumption 620,000 barrels per day, or 0.6%, below its 2025 level. Despite weaker demand, the oil market is expected to remain in deficit through the end of 2026 because supply losses continue to outpace the fall in consumption. The IEA said the market could face further volatility in the coming months if disruptions in the Middle East persist. The outlook for diesel will depend on whether refinery production and exports recover quickly enough to rebuild depleted inventories. Until that happens, the shortage is likely to remain a concern for fuel-importing countries, businesses and consumers, with the effects extending into 2027.