The Zhitong Finance App learned that the International Energy Agency (IEA) warned that the shortage of diesel supplies will continue until 2027. As transportation disruptions and inventory depletion due to the war in Iran continue to impact the market, soaring diesel prices are putting pressure on the economy and inflation.
Known as the backbone of the global economy, diesel powers almost every key industry, such as freight, manufacturing, agriculture, and construction. These supply chains are very fragile, and price changes and fluctuations can have a ripple effect on many industries.
Diesel prices have soared, and policy responses are weak
Since the outbreak of the Iran war on February 28, the average cost of gasoline in the US has risen 45% to $4.33 per gallon; however, the cost of diesel has risen even more. Currently, the average price of diesel in the US is $6.29 per gallon, an increase of more than 70% over the same period.
Supply disruptions due to the war and blockage of shipping in the Strait of Hormuz have drastically cut marine diesel exports. At the same time, already low diesel stocks have been further depleted, posing challenges to the economy.
The United States has recently taken steps to deal with this situation. The Trump administration lifted sanctions on Russian diesel and implemented new tax breaks for road use of dyed diesel. So far, however, these measures have failed to depress prices. On Tuesday, as the Houthis continued to attack Saudi infrastructure and oil flows in the Strait of Hormuz fell sharply, US diesel futures rose another 5%. Other policies, such as a ban on US diesel exports, have also been discussed, but have not been implemented so far due to concerns that they may be counterproductive.
IEA: Inventories have plummeted, and the diesel market will continue to be tight until 2027
The IEA warned in its latest “Oil Market Report”: “Record diesel prices have had a widespread impact on the economy by driving up commodity costs and affecting actual income, economic activity, and inflation.” The IEA stated, “Falling inventories, soaring pyrolysis spreads, and increased spot premiums all indicate the need for additional supply.”
The report shows that the global diesel market tightened counterseasonally in the third quarter of 2026 due to continued disruptions in exports to the Middle East and Russia, which led to a decline in inventories. Coupled with an inventory drop far exceeding normal levels in the second quarter of 2026, the global diesel market lacked critical inventory guarantees until the peak winter demand period.
Looking ahead to the future market, the IEA expects refinery production capacity to gradually recover before the end of the year, which is basically in line with the more conservative demand forecast for the fourth quarter of 2026. However, the outlook remains fragile, and any unexpected disruptions, such as the late-season hurricane in the US Gulf Coast region, could further exacerbate market tension. The US government recently announced the easing of restrictions on Russian diesel exports. This is unlikely to have a substantial impact on the balance of the global diesel market, because the current export restrictions stem from insufficient production capacity in Russian refineries.
The IEA said that the increase in global refining production will allow the diesel market to resume oversupply in the first quarter of 2027, and inventories will also basically comply with normal seasonal patterns. However, this will not be enough to cover the gap accumulated in 2026. As a result, the balance between supply and demand in the diesel market will continue to be tight in 2027 and depends on the restoration of refined oil supply in the Middle East region. If supply in the Middle East cannot be restored, further demand cuts may be needed to balance the market, but this will be at a heavy economic cost.