The Kobeissi Letter
2 hours ago
Bearish

US diesel prices hit record $5.90, some states exceed $8/gallon

2 min

US diesel prices have surpassed $5.90 per gallon for the first time on record, with some states reporting levels above $8.00. Iran has rejected the latest US peace proposal, and the US and Iran have exchanged strikes in the Strait of Hormuz. The US has entered its peak diesel demand season. Inflation expectations are rising.

Energy Prices

Diesel price levels: national average above $5.90 per gallon; select states above $8.00. Timing: peak demand intensifies pressure on trucking, agriculture, construction, and shipping costs.

Geopolitical Context

Iran rejected the latest US proposal and reciprocal strikes occurred in the Strait of Hormuz, a key oil transit chokepoint. Elevated regional risk premium supports higher refined product prices.

Economic Impact

  • Cost pass-through: higher freight and production costs likely raise goods prices.
  • Inflation metrics: upward pressure on CPI and PPI through energy and transportation components.
  • Policy sensitivity: sustained energy-driven inflation tightens financial conditions risk.

Market Implications

  • Risk assets: heightened volatility and downside pressure as inflation expectations rise.
  • Energy complex: stronger crack spreads and refined product margins; potential upside for diesel-linked futures.
  • Crypto and DeFi: mixed effects—store-of-value narratives may gain attention, but tighter liquidity and risk-off positioning weigh on prices.