Business
US diesel prices top $5 a gallon as Middle East war squeezes supply
US diesel prices surged past $5 a gallon as Middle East supply disruptions tightened fuel markets and raised global economic concerns.
US average diesel prices rose above $5 a gallon for only the second time on record on Monday, as the ongoing Middle East conflict disrupted global supply chains, raising concerns over inflation and economic growth, according to GasBuddy data.
Key highlights
- US diesel prices cross $5 a gallon for second time on record
- Middle East war disrupts global diesel supply chains
- Strait of Hormuz blockade impacts 10-20% of seaborne diesel trade
- Rising fuel costs may slow global growth and boost inflation
- Gasoline prices also hit highest level since October 2023
What happened
US average retail diesel prices crossed the $5-per-gallon mark on Monday, data from fuel-tracking firm GasBuddy showed.
This is only the second time diesel prices have breached this level, with the previous instance occurring in December 2022 during supply disruptions following Russia’s invasion of Ukraine.
Why this matters
Diesel is a key fuel for manufacturing and freight, making it a critical driver of economic activity.
Economists warn that rising diesel prices could slow global growth, as higher transportation and production costs are typically passed on to consumers, fuelling inflation.
The surge also poses a potential political challenge for US President Donald Trump ahead of the November midterm elections.
Supply disruption and global impact
The US-Israeli war with Iran, now in its third week, has considerably disrupted global diesel supply chains.
The Middle East is a major supplier of both diesel and the type of crude oil best suited for refining the fuel.
Iran’s near-complete blockade of the Strait of Hormuz is affecting an estimated 10% to 20% of global seaborne diesel supplies.
At the same time, reduced crude flows to Asian refineries have forced production cuts, further tightening global diesel availability.
“Until we see a meaningful resumption of oil flows through the Strait of Hormuz, upward pressure on fuel prices is likely to persist,” Patrick De Haan, head of petroleum analysis at GasBuddy, said in a blog post.
Other market moves
Efforts by the United States and other major economies to stabilise markets, including a record release of oil reserves, have so far failed to curb rising fuel prices.
Meanwhile, US gasoline prices climbed to $3.76 per gallon, the highest level since October 2023, according to GasBuddy data.
What next?
Fuel markets will remain sensitive to developments in the Middle East, particularly any changes in oil flows through the Strait of Hormuz.
A sustained disruption could keep diesel and gasoline prices elevated, adding pressure on inflation and economic activity globally.
FAQs
Q1: Why have US diesel prices crossed $5 a gallon?
Prices surged due to supply disruptions caused by the Middle East conflict and reduced oil flows through the Strait of Hormuz.
Q2: How major is the Strait of Hormuz for fuel supply?
It handles around 10-20% of global seaborne diesel trade, making it a critical energy chokepoint.
Q3: How do high diesel prices impact the economy?
Higher diesel costs increase transportation and manufacturing expenses, which can slow economic growth and raise inflation.
Q4: Are gasoline prices also rising?
Yes, US gasoline prices have climbed to their highest level since October 2023, reflecting broader fuel market tightness.
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