Oil prices saw an initial jump following a military strike in the Middle East but quickly reversed course, settling flat by Monday morning. Despite early fears of a sustained surge, the reaction from global energy markets was more muted than anticipated.
What stood out most for freight and transport sectors wasn’t the price of crude—but diesel’s outsized response. Ultra low sulfur diesel (ULSD) rose sharply in early trading, spiking over 3.6%, significantly outpacing the gains in both global crude benchmarks and gasoline. This divergence underscores growing concerns around diesel supply in the face of Middle East instability.
While Brent and WTI crude each rose by about 2.5% in Sunday evening trading, they retreated by the next morning, hovering near previous settlement levels. ULSD, however, remained elevated, reflecting a tight market and heightened risk to refined fuel supplies.
A key geopolitical factor remains the Strait of Hormuz—a strategic chokepoint through which nearly 20% of global oil supply flows. Any potential disruption here could impact not only crude exports but also the refined product market, especially diesel. Though some shipping initially rerouted to avoid the Strait, confidence was somewhat restored as tankers resumed passage.
Reports suggest that refining capabilities in the region have been impacted, adding to pressure on diesel markets. Both local and broader regional supply dynamics are now in flux, with some exporters potentially needing to import refined fuels to meet domestic needs.
This dynamic has led to the widest spread between diesel and crude since early 2024, reflecting constrained inventories and increased demand for middle distillates. Energy market analysts have flagged tightening inventories in both the U.S. and Europe, despite softening demand in some sectors. This has increased the “days cover” metric—how long current stocks can meet demand—but any additional supply shock could quickly shift that balance.
The situation remains fluid, with energy markets bracing for further developments. Fuel consumers—especially in freight and logistics—will be watching diesel pricing trends closely, as any sustained divergence from crude could influence transportation costs and supply chain budgets well into the second half of the year.
