Diesel Prices Surge Past $5 a Gallon as Iran War Disrupts Global Oil Supply

Key facts

• U.S. diesel prices hit $5.04 per gallon on Tuesday, up from $4.78 a week ago and $3.65 a month ago.
• Brent crude fell 2% to $108.14 but still gained roughly 9% for the week.
• Iranian drone attack sparked a fire in the Fujairah Oil Industries Zone in the UAE.
• 20% of global oil supply flows through the Strait of Hormuz, now disrupted by war.
• Diesel has climbed 34% since March 1, compared to a 27% rise for gasoline.
• Average Canadian diesel price reached $2.19 per litre, highest since 2022.
• Quebec city Chicoutimi saw highest average diesel at $2.49 per litre; Grande Prairie, Alberta had lowest at $1.85.
• Exxon and Chevron exceeded profit estimates due to higher oil and gas prices from the war.

Diesel Breaches $5 Threshold as Middle East Conflict Tightens Supply

U.S. diesel prices jumped above $5 a gallon on Tuesday, reaching $5.04 — the highest level since December 2022 — as the war with Iran continues to strain global energy markets. The price surge, up from $4.78 a week ago and $3.65 a month ago, reflects deepening disruptions to oil supply from the Persian Gulf region. Brent crude, the international benchmark, fell 2% to $108.14 on the day but still posted a weekly gain of roughly 9%. The conflict has hobbled operations in oil-producing nations, including a drone attack on Monday that sparked a fire in the Fujairah Oil Industries Zone in the United Arab Emirates.

Strait of Hormuz Disruption and Military Response

The war has severely disrupted shipping through the Strait of Hormuz, a narrow waterway through which 20% of the global oil supply flows. Iranian attacks on oil and gas facilities across the Persian Gulf have compounded the crisis. President Trump has considered a military operation to escort ships through the strait and has called on other nations to help reopen the waterway to traffic. "Until we see a meaningful resumption of oil flows through the Strait of Hormuz, upward pressure on fuel prices is likely to persist," said Patrick De Haan, a petroleum expert at GasBuddy.

Ripple Effects Across the U.S. Economy

Experts warn that rising diesel prices will push up costs across the economy because trucks, trains and barges that move most consumer goods run on diesel. Diane Swonk, chief economist at KPMG, said higher transportation costs could trickle through to other sectors, leading to broad-based price increases beyond the pump. "These are the multipliers to get to a much more broad-based increase in prices that go beyond what we see at the gas pump and showing up in things like the grocery store as well," Swonk said. The construction and farming industries are particularly vulnerable, as most of their equipment relies on diesel.

Diesel Outpacing Gasoline Price Gains

Diesel has risen faster than gasoline since the conflict began. Since March 1, diesel prices have climbed 34%, versus a 27% rise for gasoline.$5 a gallon was in December 2022, when prices were receding from a record high of $5.81 in June 2022 following Russia's invasion of Ukraine. In Canada, the average retail diesel price reached $2.19 per litre this week, the highest since 2022. Regular gasoline averaged $1.75 per litre.sel price was in Chicoutimi, Quebec, at $2.49 per litre, while the cheapest was in Grande Prairie, Alberta, at $1.85.

Trucking, Farming and Manufacturing Feel the Squeeze

Transportation companies are already feeling the financial strain. Trevor Wideman, sales manager at West Coast Transportation in London, Ontario, noted that his company's semi trucks have tanks that take about 1,000 litres to fill. "Every time there’s a conflict in the Middle East, oil and fuel prices go up instantly," he said. De Haan said diesel price spikes are "particularly disruptive" for trucking companies, farmers, freight carriers and construction firms because their budgets may not adjust quickly enough to handle fuel surcharges. Dennis Darby, chief executive of Canadian Manufacturers and Exporters, said rising fuel costs compound tariff challenges, driving up transportation and production costs.

Outlook: Persistent Upward Pressure on Fuel Prices

Analysts expect diesel prices to remain elevated as long as the Strait of Hormuz remains disrupted. The conflict shows no signs of abating, with Iranian attacks continuing to target oil infrastructure. The Biden administration's consideration of military escorts underscores the severity of the situation. For consumers, the pinch may become more apparent in the coming weeks as higher transportation costs filter through to retail goods. "People need to worry about diesel prices because that is the fuel for which consumer goods and services are delivered," said Andrew Lipow, president of Lipow Oil Associates.

The bottom line

• Diesel prices in the U.S. have surged past $5 per gallon, the highest since December 2022, driven by the Iran war disrupting oil supply through the Strait of Hormuz.
• The price increase is steeper for diesel than gasoline, with diesel up 34% since March 1 versus 27% for gasoline.
• Disruptions include a drone attack on UAE oil facilities and halted shipping through a waterway carrying 20% of global oil.
• Higher diesel costs are expected to raise prices for consumer goods, particularly groceries, as transportation expenses rise.
• Trucking, farming, construction and manufacturing sectors are most immediately affected, with companies facing fuel surcharges and budget pressures.
• The conflict's duration will determine how long prices stay elevated; any resumption of oil flows through the strait could ease pressure.