US average diesel prices cross $5 a gallon as West Asia war tests global economy

US average retail diesel prices climbed above $5 per gallon for only the second time on record, as the ongoing war in West Asia continues to squeeze supplies of the key industrial fuel.

The sharp rise in diesel prices could weigh on global economic activity, given the fuel's critical role in manufacturing and freight. Higher transportation and production costs are typically passed on to consumers, fuelling inflation. Elevated fuel prices may also pose a political challenge for US President Donald Trump as his Republican Party heads into the November midterm elections.

The national average price of diesel in the US breached the $5-a-gallon mark on Monday. The only previous instance was in December 2022, when global oil markets were still reeling from Russia's invasion of Ukraine earlier that year.

"US retail average diesel prices have topped the $5-per-gallon barrier for the 2nd time ever. That's freight inflation — and another big hit to the country's farming economy (and it has received many hit since Trump came into office)," energy expert Javier Blas stated in a X (formerly Twitter) post.

The US-Israeli war on Iran, now in its third week, has significantly disrupted global diesel supply chains, as West Asia is a major supplier of both diesel and the type of crude best suited for refining it.

Iran's near-complete blockade of the Strait of Hormuz has affected roughly 10–20 per cent of global seaborne diesel supplies.

Efforts by Trump and other global leaders to curb rising fuel prices — including a record release of oil reserves by industrialised nations — have so far had limited impact.

(With inputs from Reuters)