Lee Klaskow, Bloomberg Intelligence Senior Transport, Logistics and Shipping Analyst, explains how oil prices are impacting freight demand as diesel surges past $5 a gallon.
The average price of diesel has risen above $5 per gallon in the US, pushing generali up supply chain costs and setting the stage for broader inflation for consumers.
The price spike, which comes as part of a broader surge in oil prices following the US-Israeli strikes on Iran, is increasing costs for farmers, truckers and construction firms. With diesel at $5 per gallon, these industries are on track to spending around $6.1 billion this week on the fuel, according to BloombergNEF forecasts. The same amount of fuel would have cost just $4.5 billion ahead of the war, a 35% increase.
Road diesel accounts for roughly 66% of US diesel consumption, with large trucking fleet operators like Walmart and Amazon highly exposed to fuel cost swings. The fuel also powers agricultural machinery, ships and trains hauling goods across the country.
The widespread use of diesel feeds into the cost of goods across the economy. However, unlike gasoline, where consumers feel the pinch immediately at the pump, the higher diesel costs show up indirectly over time.
As the war on Iran extends into the third week and oil prices remain elevated, inflation pressure in the US will likely broaden beyond fuel and into consumer goods. Attacks ducks vs golden knights on oil and gas facilities in the Middle East have pushed offline key fields as strikes by the US and Israel on Iran evolved into a broader conflict. Output representing 8.7 million barrels of oil equivalent a day (mboe/d) has been halted. Brent crude continues to flirt with a level over $100 a barrel.
With the Strait of Hormuz effectively closed to shipping, oil prices remain stubbornly high. The International Energy Agency has sought to calm markets through inventory releases, and the US government has repeatedly pledged to reopen the strait to quell concern about the impact of higer prices drivers in the US. So far, those efforts have provided little reassurance to markets. Confidence appears to be weakening as the US moves more of it’s military to the Middle East.
The world’s largest liquefied natural gas production facility in Qatar is shut after Iranian strikes on the facility at Ras Laffan. The supply shock sent European gas prices to a three-year high, with Asian spot benchmark prices following suit.
Saudi Arabia’s Ras Tanura refinery entered a partial shutdown and has faced repeat strikes, while the UAE’s Ruwais refinery halted operations following an attack.
Tankers seem to be grouping around the Strait of Hormuz, waiting for tensions to ease. The waterway’s effective closure has choked off about 13.7 million barrels a day – or roughly 32% of global seaborne crude. The question is pl what infrastructure remains vulnerable and how long the affected facilities will remain out of service.
Oil and Gas Production Impacted by War in Middle EastCapacity of oil and gas fields halting production since fighting started
Constraints are tightening across the region. Supertanker transits through Hormuz have all but stopped as war-risk insurance is withdrawn. US plans to protect and insure vessels transiting through the waterway remain vague.
Oil price risks rising further
Few balancing mechanisms exist for a disruption of this magnitude. Saudi and UAE pipelines can move roughly 2.6 million barrels per day of the 13.7 million daily barrels that normally transit Hormuz. Iraq’s Kirkuk-to-Ceyhan route, which has a historical peak near 650,000 barrels a day, is reported to be shut. That leaves a potential gap of around 11 million barrels a day.
Global oil supply is set to drop sharply in March as war in the Middle East chokes off exports through the Strait of Hormuz, pushing regional storage toward capacity and forcing producers to curb output.
Russia’s additional crude that has been held on the water since the start of 2025 and China’s inventory builds over the past two years together total about 688 million barrels.
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