Diesel prices have surged to record highs in major markets, including Europe and the United States, due to mounting pressure on global supplies. The ongoing wars in Iran and Ukraine have disrupted exports from key producers such as Russia, Saudi Arabia, and the United Arab Emirates. This has resulted in a significant increase in diesel prices, with European diesel futures closing at an all-time high last week.
The supply disruptions have extended to the Red Sea, where Saudi Arabia loads most of its diesel. The conflicts in the Middle East and Ukraine have damaged oil refineries in the regions, while other refineries are operating at full capacity to produce fuels. According to the International Energy Agency, US refineries operated at their highest level in eight years in late August.
The International Energy Agency noted that many refineries worldwide are already running at full capacity, leaving limited options to prevent further supply tightening and higher prices. The agency expressed concerns about the vulnerability of global diesel markets, citing refining capacity as a key pinch point. Kpler analyst George Shaw warned that any further disruption to Red Sea flows could exacerbate the already strained global diesel market.
The impact of supply disruptions is evident in the data, with Middle East diesel exports averaging 800,000 barrels per day between March and August, half their level a year earlier. The region supplied nearly 41 percent of Europe's diesel imports in 2025. Russia, the world's second-largest diesel exporter, banned diesel exports in July after Ukrainian drone attacks affected refinery production.
The effects of the supply shortage are being felt globally, with US average retail diesel prices exceeding $6 a gallon for the first time on record this month. Inventories remain below normal seasonal levels, despite refiners operating near full capacity. In Europe, diesel stocks at the Amsterdam-Rotterdam-Antwerp refining and storage hub were at their lowest level for this time of year on September 10.
Asian diesel prices are also elevated due to disruptions in Middle Eastern and Russian supplies, nearing record levels. Benchmark Asian diesel swaps stood at around $180 a barrel on September 18, down from a March record of over $200 but still twice pre-war levels. China's diesel exports fell 26 percent in April-June from a year earlier, but shipments recovered in August to their highest level in nearly 2.5 years.
The global diesel market is expected to remain under pressure, with limited options to alleviate supply shortages. The ongoing conflicts and refinery capacity constraints will likely continue to drive prices upward. As the situation unfolds, market participants will be closely monitoring supply levels and prices to assess the impact on the global economy.
Key points
- Global diesel prices have reached record highs due to supply disruptions caused by wars in Iran and Ukraine.
- The International Energy Agency has expressed concerns about the vulnerability of global diesel markets, citing refining capacity as a key pinch point.
- US average retail diesel prices have exceeded $6 a gallon for the first time on record this month, with inventories remaining below normal seasonal levels.
