For only the second time in history, American diesel prices have crossed the $5 per gallon threshold. The culprit is familiar: a geopolitical crisis in the Middle East that has choked off a staggering share of global oil supply.

The US-Israel-Iran conflict, which escalated with military strikes on February 28, has fundamentally disrupted the flow of crude oil through one of the world’s most critical shipping lanes.

How the Strait of Hormuz broke the diesel market

The Strait of Hormuz handles roughly 20% of global oil and gas shipments. The closure of that waterway has removed an estimated 14 million barrels per day from global markets.

Brent crude prices surged over 55% from approximately $72 per barrel before the conflict to nearly $120 at its peak in March. Diesel, which is refined from crude and serves as the backbone fuel of commercial transportation and agriculture, followed crude higher with even more punishing force.

US diesel prices first crossed the $5 mark on March 16, just weeks after the initial military strikes. They kept climbing from there, peaking at around $5.69 per gallon in April. A brief respite followed, with prices dipping to $4.98 by late June. By July 16, diesel was back above $5. Since the conflict began, the total increase amounts to roughly 33%, though certain regions and time periods have seen spikes as high as 58%.

Why diesel hurts more than gasoline

Every semi-truck on the highway, every piece of farm equipment in the field, every freight train and cargo ship runs on some form of diesel. When diesel prices rise, those costs cascade through the entire supply chain. Transportation costs represent a meaningful share of the final price of most physical goods, and when those costs jump by a third or more, retailers face an uncomfortable choice between absorbing the hit or passing it along.

The agricultural sector is particularly exposed. Planting and harvest seasons are diesel-intensive by nature, and farmers can’t postpone operations until fuel prices come down. The timing of this price surge, stretching across spring planting and into summer growing season, has been especially painful for an industry already operating on thin margins.

The inflation wildcard

The 33-58% increase in diesel costs since the onset of the Iran conflict is already filtering through to consumer goods pricing. Supply-driven inflation is notoriously difficult to address with monetary policy. Raising interest rates doesn’t reopen the Strait of Hormuz.

The last time diesel prices sustained levels near $5, it was during the commodity supercycle of 2022, when post-pandemic demand collided with the Russia-Ukraine conflict. That episode contributed to the worst inflation the US had experienced in four decades. This time around, the supply disruption involves 14 million barrels per day being removed from global markets.

What investors and consumers should watch

Brent crude swinging between $72 and $120 in a matter of weeks has created a volatile environment where a single headline about military movements or diplomatic talks can move prices by several percentage points in hours.

Consumer-facing companies with heavy logistics exposure — retailers, food distributors, and e-commerce platforms — face margin compression as diesel costs ripple through the economy. Diesel prices tend to stay elevated longer than gasoline prices after a supply shock, partly because diesel inventories take longer to rebuild and partly because commercial demand is less elastic than consumer demand.