Iran War Pushes Diesel Prices Over $5 a Gallon in US

Summary

• The ongoing Iran-Israel conflict is disrupting energy supplies, pushing US diesel prices above $5/gallon for the first time since December 2022.
• Diesel is a critical economic input for trucking and farming; sustained high prices will add significant inflationary impetus to the broader economy.
• Jet fuel prices are also rising and will feed through to higher airline ticket prices, with Delta's fuel bill cited as an example of recent volatility.
• Refineries are facing crude oil supply constraints due to the conflict, leading to tight product supplies and higher prices for refined fuels.
• The UAE's Fujairah port is a critical export hub as it lies outside the Strait of Hormuz; attacks there further tighten global oil flows.
• Saudi Arabia is ramping up exports via an East-West pipeline to the Red Sea (5 million barrels/day), providing an alternative route that has not yet been targeted.
• Very limited tanker traffic is moving through the Strait of Hormuz, likely only on Iran's terms and insufficient to materially ease the supply disruption.
• Iran holds significant power in the situation, effectively dictating terms for safe passage through the Strait of Hormuz, illustrating the geopolitical risk premium.