Global fuel markets are slipping into a major demand crisis, with refinery runs projected to plunge by 5.2 million barrels per day (b/d) in the second quarter and refined fuel demand expected to contract by 4.4 million b/d as prolonged disruptions around the Strait of Hormuz severely tighten global energy supplies, according to S&P Global Energy.
The agency said the market has now crossed a critical threshold where supply disruptions are no longer temporary logistical shocks but are beginning to force large-scale fuel demand destruction across economies.
Crossing the Rubicon
On an annual average basis, S&P Global Energy now expects global refinery runs to decline by 1.9 million b/d during 2026, while refined product demand is projected to fall by 1.8 million b/d.
The latest projections reflect the agency’s base-case assumption that the effective closure of the Strait of Hormuz continues through May before oil flows gradually resume.
“We have now crossed the Rubicon,” said Daniel Evans, Vice President and Global Head of Fuels and Refining Research at S&P Global Energy.
“Given the lags between any potential restart of flows through the Strait of Hormuz and the arrival of meaningful relief to product supply, the market equation cannot be solved without demand acting as the balancer. Markets are now bracing for a severe demand reckoning through early third quarter or longer,” Evans said.
The Strait of Hormuz handles nearly one-fifth of global oil and gas trade and remains the world’s most critical energy transit chokepoint.
S&P said second-quarter fuel demand estimates were revised lower by 4.7 million b/d compared with pre-crisis projections as refiners, traders and governments struggle to manage tightening physical supplies.
The report said the scale of the projected second-quarter demand decline is more than double the contraction recorded during the weakest quarter of the 2008-09 global financial crisis, highlighting the severity of the current disruption.
Global refinery activity is expected to remain under pressure in the third quarter as well, with refinery runs projected to decline by another 2.7 million b/d year-on-year, while fuel demand could fall by 2.2 million b/d.
“As outages persist, the lag between any resumption of flows and normalization of product markets becomes insurmountable. Constrained supply defines the system, and demand must contract to fit within it,” said Karim Fawaz, Executive Director, Fuels and Refining at S&P Global Energy.
“What matters now is the ‘call on demand curtailment’ — the volume of consumption that must disappear given fixed supply constraints and limited inventory draw capacity,” Fawaz added.
Regional Impact
According to the analysis, Asia and Europe are expected to witness the sharpest refinery run cuts outside the Middle East because of their heavy dependence on disrupted crude flows and rising competition for replacement cargoes.
Together, both regions account for nearly 3.1 million b/d of the expected second-quarter refinery run decline.
The report noted that North America, Latin America and Africa currently remain relatively better insulated from the supply disruption, although the upcoming summer travel season in the US and Europe could significantly tighten regional fuel inventories and push up prices further.
“The demand crisis of 2026 started in the Middle East and Asia,” Fawaz said.
“The longer it endures and the larger the market call on demand reduction becomes, the more likely it is that large demand declines spread to other regions, either via higher prices or physical availability,” he added.
S&P said even if oil flows through Hormuz resume immediately, operational, refining and shipping delays would postpone meaningful relief to global fuel markets by months rather than weeks, prolonging volatility across energy, freight and industrial supply chains.