The global energy market is facing a crisis that is flying below investors' radars. Despite the retreat in crude oil prices, the real danger is hidden in oil refineries: armed conflicts in the Middle East and Russia have restricted fuel production, gasoline and diesel stocks are shrinking, and refining margins are soaring to record levels. The planet may not run out of oil, but it risks running out of the fuels that power the economy.
The price of crude oil is falling, creating the impression that the energy crisis triggered by conflicts in the Middle East has passed. However, the real threat is hidden elsewhere: in the refineries, warns an analysis by Reuters. The global chain that converts crude oil into fuel for households, industry, transport, and aviation is under unprecedented pressure, as war disruptions in the Middle East and Russia have hit fuel production.
Despite the fact that crude has backed down from highs of $118 per barrel at the peak of the conflict with Iran and is now moving near $85, fuel markets are sending far more alarming messages. Consumers do not buy crude oil. They buy gasoline, diesel, and jet fuel — and that is where the real danger lies.
The "silent" energy crisis: 5 million barrels of refining output off the market
Gasoline and diesel stocks have fallen near multi-year lows, while refinery profit margins have soared to record levels. According to the International Energy Agency (IEA), disruptions in the Middle East, Russia, and Asia removed about 5 million barrels per day from global refining output in the second quarter compared to a year ago. Average refinery operations were restricted to around 78 million barrels per day, as several units either remained closed or operated at reduced capacity.
The Middle East in the crosshairs – The impact of war reaches fuel
Refineries have evolved into critical targets in geopolitical conflicts. Following the outbreak of the Iran-US conflict on February 28 and the closure of the Strait of Hormuz, major refineries in Saudi Arabia, Bahrain, Kuwait, and the United Arab Emirates remain partially or fully out of service. The temporary reopening of the Strait following the June 17 ceasefire gave a brief respite to markets, but the flow of refined products remained severely restricted.
According to data from Kpler, in June the region exported approximately:
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4 million barrels of crude daily
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barely 1 million barrels of petroleum products daily
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which is roughly one-quarter of pre-war levels.
The new escalation in tension between the US and Iran brought back restrictions on navigation through Hormuz, threatening the recovery of refineries in Asia and Middle East.
Russia loses the battle of the refineries
In Russia, energy pressure stems from a different cause. Ukrainian drone strikes against Russian energy facilities have caused severe damage to the country's refining capacity, leading to fuel shortages in the domestic market. Moscow was forced to restrict diesel exports in order to contain rising domestic prices. The recovery of Russian refining production is estimated to potentially take months or even years, provided there are no new strikes — a scenario the market considers anything but certain.
The US was the market's "savior" – but now it is running low
During the first half of 2026, the United States served as the global supplier of last resort, increasing exports of crude, gasoline, diesel, and aviation fuel. But this "reservoir" is also starting to empty. American crude inventories, including commercial inventories and the strategic petroleum reserve, have dropped to their lowest level since 1984.
At the same time:
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gasoline inventories sit at their lowest seasonal levels since 2012,
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diesel inventories have barely recovered from their lowest levels in more than two decades.
Total US crude and product exports fell to 10.7 million barrels per day, down from a record high of 14.2 million barrels per day in April. With domestic demand rising due to the summer season, Washington now has limited ability to fill the gaps in the global market.
Alarm in refining margins – The market message
The clearest warning signal comes from refinery profits. The US 3-2-1 crack spread refining margin surged to nearly $70 per barrel, a record level. In northwestern Europe, margins rose close to $30 per barrel, with diesel fuel posing the single biggest problem. European diesel margins reached roughly $65 per barrel, while gasoline margins in the US are approaching levels seen during the 2022 energy crisis following the Russian invasion of Ukraine. The market does not pay such premiums unless it fears a real fuel shortage.
Trump's "ace card" may not be enough
As the crisis with Iran enters its fifth month, investors assume that US President Donald Trump will attempt to prevent an explosive rise in fuel prices due to the political cost. However, problems in refining show that the administration may have limited options.
A quick return of global fuel production is not considered likely, as:
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major refining hubs remain out of operation,
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demand for road and aviation fuel is peaking,
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diesel inventories cannot be replenished before the winter.
The last resort: demand destruction
If stocks continue to fall, the market will have only one balancing mechanism left: demand destruction. This means higher fuel prices, reduced consumption, and a potential slowdown in global economic activity. The energy market managed to absorb the shocks of the first half of 2026. However, with global fuel stocks at dangerously low levels, the global economy now appears more vulnerable than ever.
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