The U.S. benchmark diesel price used to calculate most freight fuel surcharges posted its second-largest weekly increase since the start of the conflict involving Iran, highlighting the continued impact of geopolitical tensions on transportation costs.
According to the U.S. Department of Energy’s Energy Information Administration (DOE/EIA), the national average retail diesel price climbed by 33.8 cents per gallon to reach $5.134 per gallon. Although the price was published on Tuesday, it became effective on Monday.
The increase is the largest weekly gain since March 9, when the benchmark surged by 96.2 cents per gallon after reflecting a full week of market activity following the military action launched by the United States and Israel against Iran on February 28 and March 1.
With prices rising sharply for a second consecutive week, the benchmark diesel price now stands 55.6 cents per gallon higher than it was just three weeks ago.
Retail diesel prices continue to follow movements in ultra-low sulfur diesel (ULSD) futures traded on the CME commodity exchange, although pump prices typically respond with a delay. As a result, current retail prices are believed to reflect only part of the recent increases recorded in the futures market.
Since reaching a recent low of $3.1822 per gallon on July 2, ULSD futures have climbed rapidly. During the following 11 trading sessions, prices increased on seven occasions, including single-day gains of more than 39 cents, 27 cents and 19 cents per gallon. By comparison, the largest daily decline over the same period was only 8.59 cents.
On Monday, ULSD futures settled at $4.119 per gallon, up 5.44 cents on the day and approaching a total increase of $1 per gallon since the July 2 low. It marked the highest settlement level since May 19. Trading on Tuesday morning showed prices continuing to edge higher.
The recent rally has strengthened bullish sentiment across energy markets, particularly as military tensions in the Middle East continue to affect expectations for fuel supplies.
Additional concerns emerged following reports of possible renewed Houthi attacks targeting Saudi Arabia and the Bab el-Mandeb Strait at the southern entrance of the Red Sea. Such attacks could disrupt Saudi crude exports from Yanbu, the Red Sea port connected to the Kingdom’s east-west pipeline, which allows oil shipments to bypass the Strait of Hormuz.
Matt Smith, lead energy analyst at Kpler, noted during a CNBC interview that oil tanker traffic through the Strait of Hormuz had fallen dramatically in recent days. According to Smith, only about ten tankers passed through the waterway over the previous three days, with most carrying Iranian cargoes. He suggested that, in practical terms, traffic through the strategic shipping route had nearly come to a standstill.
Both Smith and former Goldman Sachs commodity research chief Jeff Currie emphasized that refined petroleum products—not crude oil—are providing the clearest signal of current market conditions.
The price gap between Brent crude and front-month ULSD futures has hovered around $2 per gallon in recent days, compared with less than $1 per gallon before the conflict escalated.
Smith explained that while some crude production losses in the Persian Gulf have been offset by reduced refining activity, the result has been a significant decline in the supply of refined petroleum products reaching global markets.
Currie echoed that view, arguing that refined product prices provide a more accurate picture of supply conditions than crude oil prices. He said the current spread between refined products and crude is the widest he has seen in more than three decades, indicating that the market has moved beyond a simple supply deficit and is now facing genuine product shortages.
The continued rise of diesel prices is also expected to put further pressure on the freight and logistics industry operating costs and fuel surcharges, especially if geopolitical tensions and disruptions to global energy supply chains continue.
