A joint U.S.-Israeli attack on Iran caused the biggest disruption to the world's oil supply since World War II, according to J.P. Morgan's Mid-Year Outlook 2026. Before the conflict, the bank had said long-lasting supply disruptions were unlikely (J.P. Morgan). The impact has now spread beyond crude oil to refined fuels — the diesel and jet fuel that trucks, ships, and planes actually run on. The Economist reported on July 14, 2026 that fighting is disrupting refineries across the Gulf, China, and Russia, causing shortages of those fuels (The Economist).

Think of crude oil as raw flour and refineries as the bakeries that turn it into bread. Right now, some of the biggest bakeries in the world are shut down. Even if there's flour available, there's less bread on the shelves.

At the same time, the world is using less oil. J.P. Morgan estimated that global oil demand dropped by 4.3 million barrels per day in April 2026, with more than 80% of that drop in Asia and the Middle East (Reuters. This came after a warning from the International Energy Agency's Executive Director Fatih Birol in early April 2026, who said supply losses in April would be double those of March and would start cutting into economic growth (Reuters.

The picture was already getting worse before April. J.P. Morgan had published estimates on February 19, 2026 for January and February supply and demand, which became the baseline for measuring how bad things would get (Bloomberg. By March 13, 2026, J.P. Morgan noted that oil prices had surged and that more volatility could follow as the conflict continued (J.P. Morgan. That research also noted that sanctions on Russian oil are changing global trade patterns, adding a separate, longer-term problem on top of the Iran-driven shock.

The refined-fuel shortage is where the financial impact hits everyday people most directly. Goldman Sachs expected the profit margins on refined fuels — the gap between what crude costs and what the finished fuel sells for — to stay two to three times higher for the rest of 2026 compared to 2013–2019 averages, with diesel margins above pre-war levels (Reuters. The Economist's July 14 reporting backs this up: refineries in three of the world's biggest fuel-processing regions are offline at the same time, so even where crude oil is available, the finished products are scarce.

Looking at the bigger picture, the story here is how wrong the earlier forecasts were. J.P. Morgan's 2026 oil price forecast had said long disruptions were unlikely. The U.S.-Israeli strike on Iran turned that low-probability risk into the main scenario, and the following months showed the disruption wasn't a temporary spike but a lasting change in both supply and demand. The 4.3 million barrel per day demand drop matters because it means the shock is cutting demand so much that it partly offsets the supply loss — which makes predicting prices even harder.

What bears watching is the gap between crude oil prices and refined fuel prices. If refineries stay offline in the Gulf, China, and Russia while crude supply partly recovers, the price of finished fuels like diesel and jet fuel stays high even if crude oil gets cheaper. That's what Goldman's two-to-three-times margin forecast is pricing in. Diesel and jet fuel shortages push up transport and shipping costs, which feed into the prices of everyday goods. Central banks will eventually need to figure out how much of the resulting inflation is a one-time pass-through and how much is businesses and workers raising prices and wages in a lasting cycle.

The sanctions on Russian oil add another wrinkle. J.P. Morgan's view that sanctions are reshaping global trade means that even if the Iran conflict calmed down, the old supply routes and shipping arrangements wouldn't simply snap back into place. Trade has reorganized around sanctions rules, and that reorganization comes with its own costs that stick around regardless of what happens geopolitically. The oil market is dealing with two overlapping problems at once — one driven by active conflict, the other by sanctions — and both need to be part of any serious forecast.