By Nicole Jau and Shariq Khan
NEW YORK, March 4 (Reuters) – The average U.S. retail diesel price rose above $4 a gallon for the first time in nearly two years on Wednesday and is set to rise further later in the week as the U.S.-Israeli conflict with Iran threatens consumers with sticker shocks on food items.
Prices for diesel, which is mainly used in manufacturing and shipping, have soared after Iran retaliated against US and Israeli attacks on the country by bombing energy infrastructure in the Middle East and disrupting shipping in the Strait of Hormuz, a key international trade route.
The national average diesel price rose 14.7 cents to $4.04 a gallon on Tuesday, the first increase in nearly two years and the biggest daily increase since March 2022, when Russia’s invasion of Ukraine lifted global oil markets, according to AAA.
“We could see an average rise to $4.25-$4.45/gal in the coming days, but any new developments could push the needle either way,” said GasBuddy analyst Patrick de Haan.
On Wednesday, US diesel futures hit an all-time high of $3.45, the highest since September 2024.
Analysts said diesel stocks remain in tight supply globally due to high demand for heating and power generation during harsh winters in the United States and other parts of the world and a structural shortage of refinery capacity.
Alex Hoods, director of market strategy at StoneX, said the tightening in the market made diesel more susceptible to conflict in the Middle East than other fuels.
The Middle East crude oil crisis also disproportionately affects distillate supply because crude oil from the region is a distillate-rich grade, Hodes added.
About 900,000 barrels of diesel (bpd) and 350,000 bpd of jet fuel move out of the Gulf per day, equivalent to roughly 10% and 20% of the world’s maritime supply, respectively, according to cargo tracking firm Vortexa.
Costs will rise for consumers
The Middle East crisis has pushed up all oil prices in line with oil, posing a major risk to US President Donald Trump and his Republican Party ahead of mid-term elections in November. Inflation is set to be a major concern of voters, with many across the country struggling to keep up with rising costs.
“All product costs will rise if higher diesel prices push up transportation costs,” said energy economist Philip Verlager. He added that if farmers are forced to cut back on the cost of diesel, food prices may also rise.
Diesel prices have increased in the Middle East
