The Iran war disrupts the Strait of Hormuz; European benchmark diesel futures surge 34% in two days.
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The global diesel market is under severe pressure from the impacts of war.
On Tuesday, March 3, European benchmark diesel futures settled at $1,009/ton, the highest spot price since 2023. Prices surged by 34% in two days, marking the largest jump in history.
U.S. diesel futures jumped as much as 16% intraday on Tuesday, reaching $3.37 per gallon, also the highest since September 2023. Retail average prices have also risen to the highest levels since May 2024. Meanwhile, freight rates for oil products from crude oil to Northwest Europe have jumped to the highest since 2024.
As the Iran conflict spreads across the broader Middle East, global diesel prices have soared to multi-year highs. Already tight supplies are being further strained by this geopolitical shock, deepening the fuel crisis.
The sharp reaction in diesel prices will directly drive up global logistics and transportation costs, becoming a new source of inflationary pressure. For U.S. President Trump and the Republican Party, already facing mid-year election pressures, the simultaneous rise in gasoline and diesel prices presents new political risks.
Strait of Hormuz Blocked, Supply Chains Under Pressure
This round of Middle East conflict has especially impacted diesel prices, mainly because the Strait of Hormuz is the key export route for diesel produced by nearby refineries.
The escalation of hostilities has prevented large volumes of fuel from transiting normally, exacerbating the already tense global market. After an unusually cold winter, inventories on the U.S. East Coast are already low, further expanding the global supply-demand gap.
Janiv Shah, Vice President for Commodities Markets at energy consultancy Rystad Energy, said that Asian refineries' previous transport routes—buying crude from the Persian Gulf and shipping diesel to Europe—are now "facing severe risk," adding that "direct shipments from the Persian Gulf to Europe are likewise in jeopardy."
According to Bloomberg, some Asian refineries are already considering reducing operations in response to logistics bottlenecks, which will further constrain supply chain flexibility.
Crack Spreads Widen to Two-Year Highs, Diesel Premium Surges Over Crude
Diesel’s rally has evidently outpaced the overall rebound in international crude oil.
Bloomberg data show that on Tuesday morning, the premium of European diesel futures over crude oil (the crack spread) briefly surpassed $40 per barrel, the widest in over two years; crack spreads in U.S. and Asian diesel markets have also expanded significantly.
Europe previously reduced its reliance on Russian diesel by increasing imports from the Middle East, making it particularly vulnerable to this supply disruption.
Diesel is also widely used in European passenger cars, and the inelastic demand has amplified the price shock.
Jet Fuel and Naphtha Surge, Pressure Across Oil Product Markets
This price spike is not limited to diesel.
Data show that the jet fuel crack spread in Northwest Europe has soared to over $60 per barrel, the highest since 2022.
According to Vortexa data, jet fuel represents a higher share than diesel in EU imports from the Persian Gulf, making supply disruptions relatively more concentrated for the EU’s overall imports.
The naphtha market is also turbulent. Bloomberg reports that the East Asia-Northwest Europe naphtha price differential has reached a record high since data began in early 2023.
Last year, average daily naphtha exports via the Strait of Hormuz exceeded 1 million barrels, with most flowing to East Asia. Thus, any supply disruption will support prices in the region.
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