Fuel prices, particularly for diesel, are reaching new highs as ongoing conflicts in the Middle East and Ukraine disrupt crude oil supplies. These tensions have not only limited the availability of crude oil but have also caused damage to refineries, leading to significant capacity constraints in the market.
Iran’s blocking of the Strait of Hormuz shut in around 20 million barrels per day initially, but Saudi Arabia has shifted some exports to the Red Sea, and some tankers have resumed transits.
Western nations have banned the import of Russian petroleum products, and Russia has also introduced fuel export bans as Ukrainian attacks have damaged its refineries. Saudi exports via the Red Sea are now down as Iranian-backed Houthis have gained control of the Bab al-Mandeb Strait. This figure does not include countries like China that do not report data on their reserves. Diesel prices have been setting fresh records in both Europe and the United States. That has left Russia’s remaining buyers scrambling for supplies, pushing up prices. Gulf nations are also big exporters of refined petroleum products, and Iranians have targeted refineries in the region.
Because nations had ample commercial plus strategic reserves, as production had outstripped consumption in 2025, the shock on global markets has been attenuated. French officials recently estimated that the global market is missing about 10 million barrels of crude oil per day. It is a considerable amount given the global economy had been consuming on the order of 105 million barrels per day before the Middle East conflict broke out. Iran’s blocking of the Strait of Hormuz shut in around 20 million barrels per day initially, but Saudi Arabia has shifted some exports to the Red Sea and some tankers have resumed transits. The IEA estimates that what it calls observed global oil stocks are now down by around 507 million barrels from before the war. The average is at a record $6.52 per gallon in the United States on Monday, according to the AAA Automobile Association. In France, it hit a record average of 2.41 euros per litre (around $10.40 a gallon) on Sunday, according to an AFP analysis.
Meanwhile, consumption has dropped by more than one million barrels per day, according to the International Energy Agency (IEA), with China in particular sharply reducing crude imports and shifting to other energy sources. “The current world energy crisis, then, is largely a crisis in petroleum products, refined from crude oil, rather than in petroleum itself,” Nobel Prize-winning economist Paul Krugman wrote in a recent post. “And its proximate cause is a global shortage of refining capacity,” he added.
That means that even if transit through the Strait of Hormuz were to resume, the diesel market would immediately remain tight for some time. There are few short-term options.
“Diesel prices have risen across all regions because the disruption is global, but Europe is particularly exposed,” as it is a net importer of the fuel, said Janiv Shah, vice president at the consultancy Rystad Energy. “Technically, there is some unused capacity on paper, but very little that can be activated quickly and supplied with the right crude,” Shah said. A resumption of oil shipments through the Strait of Hormuz would likely be the quickest way to bring down prices, he said, as it would allow Asian refineries to be supplied. Toril Bosoni, head of the International Energy Agency’s oil industry and markets division, warned last week that “if Gulf supplies remain constrained in the coming months and commercial inventory buffers continue to deplete rapidly, higher prices and further demand reductions may be required to close the supply-demand gap”. Rystad’s Shah said that rising prices would help reduce diesel consumption, but that the impact would be limited. “Diesel demand is relatively insensitive in the short term because trucking, agriculture, construction and industry have few immediate alternatives,” he told AFP. (Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
