Average U.S. retail diesel prices surpassed $4 a gallon for the first time in nearly two years on Wednesday and are set to rise further later in the week as the U.S.-Israel conflict with Iran dragged on, threatening to hit consumers with sticker shocks on everything from food to furniture.
Prices for diesel, used mainly in manufacturing and freight, have been on a tear since Iran began retaliating against U.S. and Israeli strikes on the country by bombing energy infrastructure across the Middle East and disrupting shipping in the Strait of Hormuz, a key global trade route.
The national average price of diesel jumped 14.7 cents from Tuesday to hit $4.04 a gallon, the first time in nearly two years and the biggest daily increase since March 2022, when Russia’s invasion of Ukraine had upended global oil markets, according to AAA.
“We could see the average rise to $4.25-$4.45/gal in the days ahead, but any new developments could push the needle either way,” said GasBuddy analyst Patrick De Haan.
On Wednesday, U.S. diesel futures hit $3.45 at their peak, the highest since September 2024.
Diesel inventories have remained in tight supply globally due to heavy demand for heating and power generation during a harsh winter in the U.S. and other parts of the world and a structural shortage of refining capacity, analysts said.
The tightness in the market has made diesel more sensitive to the conflict in the Middle East than other fuels, said Alex Hodes, director of market strategy at StoneX.
The disruption of Middle East crude oil also disproportionately affects distillate supplies because crude oil from the region tends to be more distillate-rich grades, Hodes added.
Around 900,000 barrels per day (bpd) of diesel and 350,000 bpd of jet fuel move out of the Gulf, equivalent to roughly 10% and 20% of global seaborne supply respectively, according to cargo tracking firm Vortexa.
COSTS WILL RISE FOR CONSUMERS
The Middle East crisis has sent prices for all fuels soaring in tandem with oil, posing a major risk to U.S. President Donald Trump and his Republican Party ahead of midterm elections in November. Inflation is set to be a key concern of voters, with many across the country struggling to keep up with rising costs.
“The costs of all products will rise if high diesel prices increase transport costs,” energy economist Philip Verleger said. Food prices could also rise if farmers have to reduce plantings because of high diesel costs, he added.
Average U.S. retail gasoline prices hit the $3 a gallon mark for the first time since November on Monday. Gasoline futures reached $2.54, the highest since July 2024.
(Reporting by Nicole Jao and Shariq Khan in New York; editing by Diane Craft)