Diesel prices rise faster than oil amid Iran conflict

The global diesel market has seen record growth amid the escalation of the conflict in the Middle East. This will lead to an increase in transportation costs. Bloomberg reports.

In Europe, futures jumped 34% in just two days, closing at $ 1,009 per ton.

In the United States, the cost of a gallon of diesel rose 16%, reaching $ 3.37, the highest level since the fall of 2023.

Retail prices at gas stations have also returned to mid-2024 levels, creating additional pressure on end consumers.

The main reason for the price shock was the risk of disruption of supplies through the Strait of Hormuz – a key route for exporting petroleum products from Persian Gulf refineries.

The situation is complicated by low fuel supplies on the US East Coast after a cold winter and a sharp increase in logistics costs.

Tariffs for transporting fuel from the Middle East to Europe have jumped to record levels as shipping in the region has come under direct threat from military action.

Diesel, which is critical for freight, industry and heating, is traditionally considered an indicator of the health of the global economy.

Its rise in price will inevitably lead to an increase in transportation costs and overall inflation. For the Donald Trump administration, this price jump creates political risks ahead of the midterm elections.

Meanwhile, Europe, which has become dependent on Middle Eastern imports after abandoning Russian energy resources, is in the most vulnerable position.

Benchmark diesel futures in Europe closed at $1,009 a tonne on Tuesday, up 34% in two days, the highest spot price since 2023.

European futures were more than $40 a barrel above crude, the widest crack spread in more than two years, according to Bloomberg data. Diesel’s premium to crude also widened in the US and Asia.

“Diesel supplies to Europe from refineries in Asia that use Gulf crude are now under serious threat,” said Janiv Shah, vice president of commodity markets at Rystad Energy.

The rise in diesel prices has outpaced even the rise in Brent crude, reflecting acute shortages of the finished product.

Some Asian refineries are already considering cutting production due to logistical difficulties.

In addition to diesel, a similar situation is observed with aviation fuel. In northwestern Europe, the premium of jet fuel to crude oil has exceeded $60 per barrel, the highest level since 2022, according to Bloomberg data.

The EU receives cargoes of both diesel and jet fuel from the Persian Gulf, but the latter accounts for a larger share of total supplies, according to Vortexa data. This means that any disruption to these flows poses a greater threat to EU imports.

Tags: prices, fuel