A trio of escalating geopolitical conflicts is threatening global diesel supplies, raising new concerns about the potential for protracted fuel shortages.
As a July 15 report from Oxford Economics noted, the oil market is currently being tested by three simultaneous disruptions: The re-closure of the Strait of Hormuz, renewed Houthi threats to Red Sea shipping, and Russia's recent ban of diesel exports. Of particular concern is diesel, which the report described as the fuel most exposed to the supply strains because of its central role in freight transportation.
"There is a growing tail risk of acute diesel shortages, which could constrain freight, agriculture and industrial production," Oxford Economics warned.
Russia fully banned all diesel exports in early July, in the wake of Ukrainian drone strikes against key refineries that have created fuel shortages across the country. Normally, Russia exports nearly half of the diesel it produces, and accounts for roughly 12% of global diesel exports, making it the second largest supplier in the world after the United States. And although neither the U.S. nor Europe rely on Russian fuel, an export ban still forces other buyers to compete with diesel importers like Europe for supplies, which can raise prices for the market at large.
Russia's export ban also compounds supply disruptions stemming from the Middle East, where a tenuous ceasefire between the Iran and U.S. has quickly unraveled in recent days. With Iran having once again declared the Strait of Hormuz closed, and President Donald Trump resuming a U.S. blockade, traffic through the waterway has plunged to its lowest levels in two months.
"The speed of the breakdown highlights the distance between the two sides and makes a durable settlement unlikely in the near term," Oxford Economics said.
Meanwhile, a Houthi missile attack against Saudi Arabia broke a four-year informal truce between the two sides, bringing more uncertainty to shipping through the Red Sea, which Saudi Arabia has used as an alternative to the Strait of Hormuz for oil exports. As Oxford Economics explains, that alternate route has been crucial for cushioning the sharp decline in Gulf oil supplies caused by the Iran war, and if Iran-backed Houthi attacks threaten to block that bypass, it could further strain Middle Eastern oil supplies.
A recovery in the crude oil market will largely depend on whether there are meaningful improvements to shipping through the Strait of Hormuz. If traffic through the waterway continues to stall — and if Russian refineries are further damaged — supplies could be constrained through the the remainder of 2026 and beyond, Oxford Economics predicted.
