Iran war fuels record fuel prices as midterms loom
Left says
- •Energy inflation from the Iran war is a real, quantifiable burden, with a Brown University tracker estimating $100 billion in extra costs to consumers and rising, disproportionately hurting working-class households that spend a larger share of income on gas and diesel.
- •Trump's own shifting timeline—from predicting prices would fall 'precipitously' to now admitting relief may not come until after the midterms—undercuts his earlier campaign promise to cut energy prices in half within a year of taking office.
- •Core inflation and energy-driven price spikes are politically inconvenient for Republicans heading into the midterms, since voters consistently rank inflation as their top concern and give Trump poor marks on it.
- •The administration's willingness to accept higher prices as the cost of preventing Iran from obtaining nuclear weapons deserves scrutiny given the scale of the economic pain being distributed unevenly across states like Texas, California, and Florida.
Right says
- •The price spikes stem from real global supply disruptions—Middle East conflict, Ukrainian strikes on Russian refineries, and Houthi threats to Saudi shipping lanes—not from any domestic policy failure.
- •Trump has been direct with Americans that confronting Iran's nuclear ambitions carries near-term costs, and he has offered a $5,000 dividend proposal to offset the burden if Republicans win a legislative majority.
- •Energy Department forecasts are revised monthly and inherently uncertain, so current diesel price projections shouldn't be treated as fixed outcomes, especially since EIA itself expects a return to normal Hormuz shipping to ease pressure by 2027.
- •National security priorities, including preventing a nuclear-armed Iran, justify short-term economic sacrifice, and Americans have shown willingness to accept costs tied to that goal in the past for existential threats.
Common Take
High Consensus- Diesel and gasoline prices have hit record highs, with diesel surpassing $6 a gallon and gasoline averaging over a dollar more per gallon than a year ago.
- The Iran war, combined with Ukrainian attacks on Russian refineries and Houthi activity near Saudi shipping lanes, is a primary driver of the global supply crunch pushing up fuel prices.
- Inflation remains elevated at 3.4% annually, with energy costs playing an outsized role in the August CPI report.
- The timing of sustained high fuel prices so close to the midterm elections creates significant political stakes for the administration and Republican candidates.
The Arguments
Left argues
The Brown University tracker's $100 billion figure represents a quantifiable, real-time burden that is disproportionately hurting working-class households and states like Texas, California, and Florida, and it keeps rising even as Trump's promised relief keeps getting pushed back.
Right counters
The price spikes trace to identifiable external shocks—Houthi attacks on Saudi shipping, Ukrainian strikes on Russian refineries, and Middle East conflict disrupting supply—not to any domestic policy choice the administration made, so blaming the White House for global market dynamics misattributes causation.
Right argues
Trump has been transparent that confronting Iran's nuclear program carries near-term economic costs, and he's proposed a $5,000 dividend to offset the burden if Republicans win, which is a more honest approach than pretending a war has no economic consequences.
Left counters
That transparency is undercut by Trump's own shifting rhetoric—first promising prices would fall 'precipitously' and 'quickly,' then admitting relief won't come until after the midterms—suggesting the earlier framing was more about political timing than genuine forecasting.
Right argues
EIA forecasts are revised monthly and inherently uncertain, and the agency itself still expects a return to normal Hormuz shipping traffic to ease distillate crack spreads and bring prices down by 2027, so current elevated projections shouldn't be read as a permanent verdict on the war's economic cost.
Left counters
The EIA's own caveat cuts both ways: if Middle East flows remain constrained beyond 2026, crack spreads would be even higher than currently forecast, meaning the uncertainty could just as easily mean prices get worse, not better, before any relief arrives.
Left argues
Core inflation excluding food and energy still rose to 2.4%, and with gasoline up 27.4% and heating fuel up 52% year-over-year, this is bleeding into broader consumer sentiment, bond yields, and household budgets in ways that go well beyond a temporary, isolated price shock.
Right counters
National security priorities like preventing a nuclear-armed Iran have historically justified short-term economic sacrifice, and Americans have shown willingness to bear costs tied to existential threats before, making this a deliberate tradeoff rather than a policy failure.
Left argues
Voters consistently rank inflation as their top concern and give Trump poor marks on the issue, so the political cost of this energy shock is real and measurable heading into the midterms, regardless of who is ultimately to blame for the underlying supply disruptions.
Right counters
Political vulnerability doesn't prove policy failure—voters may simply be reacting to visible pump prices without weighing the counterfactual cost of allowing Iran to obtain nuclear weapons, which is a judgment call the administration argues is worth the short-term pain.
Challenge Questions
These questions target genuine internal contradictions — meant to provoke honest reflection.
Right asks Left
“If the same energy price spikes were being driven by a Democratic administration's foreign policy decisions during a comparable national security crisis, would the framing of these price increases as a 'policy failure' rather than a 'necessary tradeoff' remain consistent?”
Left asks Right
“If EIA forecasts are too uncertain to be treated as fixed outcomes when they show bad news, does that same uncertainty undermine confidence in the administration's own predictions that prices will fall 'precipitously' once the war ends?”
Outlier Report
Left Fringe
Progressive commentators like Robert Reich and some Bernie Sanders-aligned voices frame this as proof of Trump's economic incompetence and call for immediate withdrawal from the Iran conflict regardless of nuclear risk, representing roughly 15-20% of the left.
Right Fringe
Hardline MAGA figures like Steve Bannon and some America First commentators argue the war itself was a mistake driven by neocon influence and reject both the cost-benefit framing and the $5,000 dividend as insufficient, representing roughly 10-15% of the right.
Noise Assessment
Moderate; the diesel/gas price data itself is objective and widely reported, but partisan framing around blame (Trump's broken promises vs. justified national security sacrifice) is amplified by cable news and social media well beyond how most economically-anxious swing voters actually process the issue, which is more visceral (higher prices = bad) than ideological.
Sources (13)
<p>The <a href="https://www.axios.com/2026/09/11/diesel-6-dollars" target="_blank">record price of diesel</a> threatens to stoke inflation at a time when consumers are already price-sensitive and businesses are reeling from higher costs due to trade tensions. </p><p><strong>Why it matters: </strong>Diesel is a key cost throughout the supply chain, meaning soaring prices could eventually show up in what consumers pay for everything from groceries to household goods.</p><hr /><p><strong>Driving the news: </strong>The national average price of a gallon of <a href="https://www.axios.com/2026/09/09/energy-department-hikes-2027-diesel-price-outlook" target="_self">diesel</a> topped $6 for the first time ever, AAA said Friday, Axios' Ben Berkowitz <a href="https://www.axios.com/2026/09/11/diesel-6-dollars" target="_blank">reports</a>.</p><ul><li>That's up 60% from a year earlier.</li></ul><p><strong>Between the lines: </strong>Food prices could be among the first places consumers feel the ripple effects, executives said this week.</p><ul><li>At grocery chain Kroger, which has been trying to keep a lid on prices: "I would expect that the pressure is actually going to mount," CEO Greg Foran said Friday on an earnings call.</li><li>At pork producer Smithfield Foods: "That impact is beginning to flow through in the second half of the year," CFO Mark Hall said Thursday.</li><li>At Hormel Foods: "With the Iran war and the spike in diesel costs, that's been something we've had to confront," interim CEO Jeffrey Ettinger said Wednesday.</li></ul><p><strong>But the effects</strong> extend well beyond food.</p><ul><li>For example, at Newell Brands — whose portfolio includes Rubbermaid, Sharpie and Coleman — the inflationary impacts of energy costs have far exceeded the company's initial estimates.</li><li>"It's either resin, which is obviously dependent on the price of oil, or it is direct transportation costs, i.e., diesel," CFO Mark Erceg said Tuesday.</li></ul><p><strong>The big picture: </strong>Energy prices have spiked since President Trump launched the war with Iran, which prompted the closure of the Strait of Hormuz, a key shipping lane.</p><ul><li>The latest Energy Information Administration <a href="https://www.eia.gov/outlooks/steo/pdf/steo_full.pdf" target="_blank">outlook</a> expects retail diesel to average $4.40 a gallon in 2027, up 33 cents, or 8.2%, from its previous forecast of $4.07, Axios' Rebecca Falconer and Ben Geman <a href="https://www.axios.com/2026/09/09/energy-department-hikes-2027-diesel-price-outlook" target="_blank">reported</a>.</li><li>The average price of unleaded gasoline has also spiked, rising by $1.11 over the last year to $4.30 per gallon as of Friday, <a href="https://gasprices.aaa.com/" target="_blank">according to AAA</a>.</li></ul><p><strong>By the numbers:</strong> 47 of the 50 states have experienced an increase in average diesel prices of more than $2 per gallon over the last year, <a href="https://x.com/GasBuddyGuy" target="_blank">according to GasBuddy analyst Patrick De Haan</a>.</p><ul><li>The economy is facing an extra $300 million in diesel costs every 24 hours.</li><li>California is poised to become the first state with average diesel prices above $8 — with many stations already above $9, according to GasBuddy.</li></ul><p><strong>The bottom line: </strong>Record diesel prices are turning the energy shock into a broader cost shock for businesses and consumers.</p>
<p>The <a href="https://www.axios.com/energy-climate" target="_blank">Energy</a> Department's statistics arm on Wednesday sharply raised its forecast for U.S. diesel prices next year as tight global supplies keep domestic inventories unusually low.</p><p><strong>Why it matters:</strong> The outlook suggests Americans could face elevated fuel costs well into 2027, as President <a href="https://www.axios.com/politics-policy/donald-trump" target="_blank">Trump</a> acknowledged Wednesday that <a href="https://www.axios.com/energy-climate/oil-companies" target="_blank">oil</a> prices may not fall until after November's <a href="https://www.axios.com/politics-policy/2026-midterm-elections" target="_blank">midterm</a> elections.</p><hr /><ul><li>U.S. diesel prices hit <a href="https://www.axios.com/2026/09/04/diesel-prices-record-iran-truckers-farmers" target="_blank">all-time highs</a> this month, due to the Middle East conflict thwarting oil and petroleum product supplies, and Ukraine's drone campaign <a href="https://www.axios.com/2026/07/17/russia-diesel-oil-drones" target="_self">targeting Russian refineries</a>.</li></ul><p><strong>Driving the news:</strong> The latest Energy Information Administration <a href="https://www.eia.gov/outlooks/steo/pdf/steo_full.pdf" target="_blank">outlook</a> expects retail diesel to average $4.40 a gallon in 2027, up 33 cents, or 8.2%, from its previous forecast of $4.07.</p><ul><li>In a Wednesday evening email, EIA emphasized that low distillate inventories are the primary driver of the increase in its 2027 diesel price forecast.</li><li>The outlook says low U.S. distillate inventories are being driven by supply losses from the Middle East, <a href="https://www.axios.com/world/russia" target="_blank">Russia</a> and <a href="https://www.axios.com/world/china" target="_blank">China</a>, alongside unusually high U.S. net exports.</li><li>It expects the inventory problem to be particularly acute this fall and winter because refinery maintenance cuts production just as agricultural and winter demand rises.</li><li>EIA also raised its 2026 forecast 22 cents to $5.07 a gallon.</li></ul><p><strong>Zoom in: </strong>"We forecast U.S. distillate fuel oil inventories will drop below 100 million barrels in September and will remain below the five-year (2021–2025) low through much of 2027," per the agency's statement.</p><ul><li>"Tightness in the global distillate market has raised domestic prices and incentivized U.S. exporters to increase distillate exports," it added.</li><li>"We assume global production of distillate fuel will remain below last year's levels in the coming months, contributing to low U.S. diesel inventories and high diesel prices."</li></ul><p><strong>The big picture:</strong> Trump <a href="https://x.com/Acyn/status/2097754812557435029" target="_blank">said</a> Wednesday that oil prices would start "tumbling downward" after the election, but added that relief could take "a little bit longer than the midterms."</p><ul><li>"I think for gasoline, we'll get them below $2 a gallon. But not until after the midterms," Trump said.</li><li>The comments mark a shift from Trump's <a href="https://x.com/TrumpTruthOnX/status/2097102133866951153" target="_blank">prediction</a> earlier this week that oil prices would fall "precipitously" after the U.S. wins the Iran war and that the decline would happen "quickly."</li></ul><p><strong>Zoom out: </strong>Before the Iran war, EIA <a href="https://www.eia.gov/outlooks/steo/archives/feb26.pdf" target="_blank">expected</a> diesel to average $3.47 a gallon in 2027 — 93 cents less than its latest forecast.</p><p><strong>Caveat:</strong> EIA updates the outlook monthly, and its forecasts are subject to frequent revision as market conditions and underlying assumptions change.</p><p><strong>Flashback:</strong> Trump repeatedly pledged during the 2024 campaign to cut U.S. energy prices in half within 12 months of taking office.</p><ul><li>In March this year, Energy Secretary Chris Wright told CNN, "We have seen a dramatic decline in gasoline prices, in diesel prices."</li></ul><p><strong>The intrigue:</strong> EIA expects diesel crack spreads — a measure of refining margins based on the difference between crude oil and diesel prices — to fall steadily through mid-2027 even as its forecast for retail diesel prices next year has risen.</p><ul><li>That's based partly on an assumed return to normal tanker traffic through Hormuz in the near term, which would allow Saudi and Kuwaiti refineries to export more distillate.</li><li>EIA expects improved crude availability to East Asian refiners to boost distillate production.</li></ul><p><strong>Yes, but: </strong>If Middle East flows remain constrained beyond the end of 2026, EIA says global distillate crack spreads would be higher than currently forecast.</p><ul><li>Russian refinery outages are expected to affect global markets through the first half of 2027.</li></ul><p><strong>What's next: </strong>The U.S. average retail diesel price could top $6 per gallon within the next week or so, GasBuddy's Patrick De Haan <a href="https://x.com/GasBuddyGuy/status/2097354406689681424" target="_blank">said</a> Tuesday.</p><p><strong>Go deeper: </strong><a href="https://www.axios.com/2026/09/07/iran-gas-prices-diesel-100-billion" target="_blank">Iran war drives $100 billion in extra energy costs for U.S. consumers</a></p><p><em>Editor's note: This story has been updated with EIA comment.</em></p>
<p>The war in <a href="https://www.axios.com/world/iran" target="_blank">Iran</a> has now cost U.S. consumers $100 billion in higher energy prices, and the bill is rising another $1 million about every two minutes, per a real-time estimate from Brown University as of Monday morning. </p><p><strong>Why it matters</strong>: Energy inflation shows up across the entire economy, and the recent surge in diesel prices in particular threatens to have a dramatic impact on freight and travel in the weeks and months to come.</p><hr /><p><strong>By the numbers</strong>: The <a href="https://iranwarcost.watson.brown.edu/" target="_blank">Iran War Energy Cost Tracker</a> from Brown's Watson School says higher gasoline and diesel prices have cost the average U.S. household more than $760<strong> </strong>since the war began Feb. 28.</p><ul><li>Most of that is gas, though the diesel burden is rising faster of late.</li><li>On Friday, <a href="https://www.axios.com/2026/09/04/diesel-prices-record-iran-truckers-farmers" target="_blank">diesel</a> hit an all-time record high, and it's continued to rise every day since. As of Monday morning it's at $5.90 a gallon, per AAA, up about 60% from a year ago. </li></ul><p><strong>Between the lines: </strong>Texas has borne the biggest share, with consumers paying around $11 billion in extra gas and diesel costs since the war began in late February, per the tracker.</p><ul><li>California and Florida are next, at about $8 billion and $5 billion, respectively. </li></ul><p><strong>The big picture</strong>: President <a href="https://www.axios.com/politics-policy/donald-trump" target="_blank">Trump</a> insists Americans are willing to pay higher prices to keep Iran from having a nuclear weapon.</p><ul><li>Yet voters consistently say inflation is their most important issue, and on that subject they give the president substantial <a href="https://www.realclearpolling.com/polls/approval/donald-trump/issues/inflation" target="_blank">negative marks</a>.</li></ul><p><strong>What we're watching: </strong>There's still a <a href="https://www.axios.com/2026/09/04/trump-strait-hormuz-oil-claims-iran" target="_blank">great deal of uncertainty</a> over how much oil is getting out of the Middle East, which will impact fuel prices in the coming weeks and months. </p><ul><li>The war in Ukraine is also having a significant effect, as Ukrainian attacks on Russian energy infrastructure move global markets, particularly for diesel. </li></ul><p><strong>The bottom line: </strong>Consumers are in for a longer period of higher fuel prices than anyone expected when the war began. </p><ul><li>With less than two months until the midterm elections, it'll be hard to temper their anger. </li></ul>
<p>Annualized inflation rate was 3.4%, same as July, and core inflation, which omits energy and food prices, rose to 2.4%</p><p>US consumer prices remained stubbornly high in August as the end of the ceasefire between the US and <a href="https://www.theguardian.com/world/iran">Iran</a> pushed energy prices up, according to data from the US Bureau of Labor Statistics released on Friday.</p><p>The annualized <a href="https://www.theguardian.com/business/inflation">inflation</a> rate was 3.4%, the same as it was in July. The most recent peak was seen in May, when the inflation rate hit a three-year high at 4.2%. Core inflation, which strips out volatile energy and food prices, increased 0.3% from the month before and 2.4% annually.</p> <a href="https://www.theguardian.com/business/2026/sep/11/inflation-august-interest-rates">Continue reading...</a>
<p>Crude jumps above $107 a barrel amid concerns over Middle East conflict and out-of-control government borrowing</p><p>Nervous investors across big economies have been dumping government bonds, driving up the cost of borrowing, as surging oil prices amplified fears about rising inflation.</p><p>The cost of a barrel of oil jumped 6% to above $107 on Thursday amid concerns that <a href="https://www.theguardian.com/world/2026/sep/10/houthis-seize-key-port-mocha-yemen-red-sea-coast-iran-saudi-arabia-us">advances by Houthi rebels</a> along the Red Sea coast in Yemen could choke off Saudi crude exports.</p> <a href="https://www.theguardian.com/business/2026/sep/10/global-bond-selloff-oil-prices-inflation-middle-east-conflict-government-borrowing">Continue reading...</a>
<p>Borrowing costs climb in Europe and oil tops $105 a barrel as bank says growing price pressures in eurozone will be ‘longer lasting than we had anticipated’</p><ul><li><p><a href="https://www.theguardian.com/business/live/2026/sep/10/markets-economy-oil-uk-flight-disruption-primark-home-delivery-business-live-news">Business live – latest updates</a></p></li></ul><p>The European Central Bank has raised interest rates to 2.5% and warned that the risk of higher inflation over the next year has risen following renewed fighting in the Middle East.</p><p>It came as government borrowing costs soared on the back of a jump in oil and gas prices after the latest US and Iran attacks on ships in the strait of Hormuz.</p> <a href="https://www.theguardian.com/business/2026/sep/10/ecb-raises-interest-rates-to-25-amid-warning-iran-war-is-fuelling-inflation">Continue reading...</a>
Inflation remained unchanged in August as gas prices continued to rise amid the war with Iran, new data from the Bureau of Labor Statistics (BLS) showed Friday. The consumer price index (CPI) increased 0.4 percent last month and 3.4 percent over the same time last year. This was unchanged from July, when the annual inflation rate also sat at 3.4 percent. …
<p>The national average price of a gallon of <a href="https://www.axios.com/2026/09/09/energy-department-hikes-2027-diesel-price-outlook" target="_blank">diesel</a> jumped over $6 for the first time ever, AAA said on Friday.</p><p><strong>Why it matters: </strong>The fuel that runs the economy is getting more expensive by the day, costing businesses and consumers alike billions of dollars. </p><hr /><ul><li>While the $6 threshold is more psychological than anything else, it points to months of continued pain for drivers, shippers and shoppers. </li></ul><div>Data: AAA; Chart: Ben Geman/Axios</div><p><strong>Driving the news: </strong>At $6.0556<strong> </strong>a gallon, diesel is about 14% more expensive than it was a month ago and over 60% more than a year ago. </p><ul><li>That is starting to show up in other prices, as has long been feared; inflation data out Thursday showed <a href="https://www.axios.com/newsletters/axios-macro" target="_blank">sharp spikes</a> in transportation and warehousing costs, for example. </li></ul><p><strong>Stunning stat: </strong>Brown University <a href="https://iranwarcost.watson.brown.edu/" target="_blank">estimates</a> higher diesel prices have cost U.S. consumers more than $46 billion since the war began.</p><ul><li>About 20% of that is in Texas and California alone. </li></ul><p><strong>The intrigue: </strong>The White House's position is that fuel prices will come down after the midterms as the war with Iran winds down and oil supplies improve.</p><ul><li>But the Department of Energy sharply raised its 2027 diesel price forecast this week, acknowledging a painful higher-for-longer scenario.</li></ul><p><strong>The bottom line: </strong>With diesel at $6, inflation looks like it's here to stay for a while. </p><p><em>Ben Geman contributed reporting. </em></p>
<p>The average price of <a href="https://www.axios.com/2026/03/17/diesel-gas-prices-economy" target="_blank">diesel topped</a> its 2022 record high on Friday<strong>,</strong> spiking to $5.85 per gallon, per <a href="https://gasprices.aaa.com/" target="_blank">AAA</a>.</p><p><strong>Why it matters: </strong>Farmers, truckers and freight companies have been absorbing higher diesel costs since the Iran war began. The ballooning price threatens to further raise shipping costs while compounding a growing political problem for <a href="https://www.axios.com/politics-policy/donald-trump" target="_blank">President Trump</a>. </p><hr /><ul><li>It can also indirectly affect households by putting inflationary pressure on anything Americans buy that's carried by truck, which includes a <a href="https://www.census.gov/library/stories/2021/02/what-is-in-that-truck-i-just-passed-on-the-highway.html" target="_blank">massive share</a> of goods.</li></ul><p><strong>Driving the news: </strong>Diesel has been rising steadily for weeks, but surged 17 cents in just the last two days. </p><ul><li>The previous record was $5.816, per AAA, set in June 2022.</li><li>Diesel typically costs more than gasoline because of higher taxes, stricter environmental regulations requiring expensive refining and a lower production yield per barrel of oil. </li></ul><p><strong>Worth noting: </strong>While the strangling of the Strait of Hormuz cast the global market into disarray, Ukraine's highly effective drone campaign <a href="https://www.axios.com/2026/07/17/russia-diesel-oil-drones" target="_self">targeting Russian refineries</a> has further strained worldwide diesel refinery capacity.</p><ul><li>"Until that refining supply picture improves, both gasoline and diesel prices face continued upward pressure," Patrick De Haan, head of petroleum analysis at GasBuddy, <a href="https://gaspriceguy.substack.com/p/another-week-of-rising-fuel-prices" target="_blank">writes</a>.</li><li>The diesel crack spread — the price difference between a barrel of crude and the refined product — hit unprecedented triple-digit <a href="https://oilprice.com/Energy/Energy-General/100-Diesel-Cracks-Signal-a-Much-Tighter-Oil-Market-Than-Brent-Suggests.html" target="_blank">highs</a> in recent weeks. </li></ul><p><strong>The big picture: </strong>"Diesel is an input to virtually everything we consume," says Erich Muehlegger, an economics professor at the University of California-Davis.</p><ul><li>Diesel price spikes raise<strong> </strong>production costs in diesel-dependent industries like fishing, farming and construction. For farmers, it's a double whammy, with the war also driving fertilizer costs higher. </li><li>The record high price comes as the energy-thirsty peak of harvest season looms for <a href="https://www.axios.com/2026/08/20/farms-harvest-diesel-fuel-prices" target="_blank">corn and soybeans</a>, the nation's largest farm commodities, <em>Axios' Ben Geman</em> reports.</li></ul><p><strong>Zoom out:</strong> Diesel also fuels the country's trucking fleets. While large carriers like FedEx and UPS have <a href="https://www.supplychaindive.com/news/fedex-ups-postal-service-fuel-surcharge-reduction-tips/816330/" target="_blank">increased</a> their fuel surcharge rates to account for the spiking prices, smaller businesses are more sensitive to volatility. </p><ul><li>George O'Connor, public affairs director at the Owner-Operator Independent Drivers Association, said in an email to Axios that small business truckers "are the first to feel it when prices jump."</li><li>Unlike larger competitors, he explained in an email, they can't just raise rates when fuel spikes. Independent truckers, on the other hand, often have less negotiating leverage and work load to load.</li><li><em>"</em>With freight rates already low, a sharp increase in diesel can quickly eat up what little margin a small trucking business has left," he added.</li></ul><p><strong>This time of year</strong>, the U.S. would usually see significant increases in diesel inventory ahead of the fall refinery maintenance season, Jason Miller, a professor in supply chain management at Michigan State University, told Axios.</p><ul><li>"We could be looking at some basically unprecedented low diesel inventories for that time of the year when we start getting into refinery maintenance season."</li><li>"Lord forbid we have a catastrophic hurricane," Miller said.</li></ul><p><strong>Reality check: </strong>Fuel costs are just a fraction of overall prices consumers see, Muehlegger notes.</p><ul><li>"But the punchline here is that with higher diesel prices, that's putting upward pressure on prices, and upward pressure ... generally within the economy," he says.</li><li>Miller previously told Axios that gas prices matter more than diesel for the consumer's pocketbook. But for the overall economy, he says, "diesel matters more."</li></ul><p><strong>What we're watching:</strong> If those price hikes show up in core goods down the line, rather than just retail gasoline or electricity prices, <a href="https://www.axios.com/2026/03/17/diesel-gas-prices-economy" target="_blank">that could</a> make it harder for the Federal Reserve to justify cutting interest <a href="https://www.reuters.com/commentary/reuters-open-interest/iran-war-stagflation-premium-quietly-mounts-2026-07-22/" target="_blank">rates</a> or even push rates higher. </p><ul><li>"The Fed is in a box here," John Kilduff,<strong> </strong>Founding Partner of Again Capital, said recently on CNBC. "They are going to be staring down an inflation pulse now from this renewed price spike."</li></ul><p><strong>Go deeper: </strong><a href="https://www.axios.com/2026/04/01/crude-oil-costs-explain-convert-gas-prices" target="_blank">Here's how to understand crude oil costs and what they mean for gas prices</a></p>
<p>Oil prices are heading back toward $100 a barrel, and, perhaps more crucially, the price of diesel fuel futures is now sitting at an all-time high. </p><p><strong>Why it matters:</strong> Investors are starting to recognize that higher oil prices from the Iran war aren't something they can continue to ignore.</p><hr /><p><strong>The big picture: </strong>Higher energy prices are showing up across the economy, driving up costs for companies, regular people and even governments around the world that are now facing higher borrowing rates.</p><ul><li>The rising price of energy is a big factor pushing bond yields higher and worrying policymakers in the U.S. and the rest of the developed world.</li></ul><p><strong>Catch up quick: </strong>After falling off initial early war highs, oil prices started rising in July. At the time, attacks on commercial vessels in the Strait of Hormuz reignited fighting, and President Trump said the "memorandum of understanding" the two countries had signed weeks before was <a href="https://www.axios.com/2026/07/08/trump-iran-ceasefire-over" target="_blank">"over."</a></p><p><strong>State of play:</strong> Over the past few days, tensions have <a href="https://www.axios.com/2026/09/02/iran-tankers-hormuz-attacks-oil" target="_blank">intensified</a>.</p><ul><li>The price of a barrel of Brent crude oil, the global benchmark, was trading at $95 on Wednesday afternoon, up from the low $80s a month ago.</li></ul><p><strong>By the numbers: </strong>The yield on the 10-year Treasury — a benchmark for mortgages and other loans — was hovering at around 4.8% Wednesday, after touching its highest level in nearly three years.</p><p><strong>Follow the money: </strong>Government bond yields around the world are also at multiyear highs. </p><ul><li>The U.K.'s 10-year gilt hit its highest level since 2008; Germany's long bond rose to its highest since 2011. And the government bonds of Japan, an importer of oil vulnerable to energy price shocks, touched their highest level since 1996. </li><li>Stocks have moved basically sideways over the past week.</li></ul><p><strong>How it works: </strong>The rise in oil prices is driving up inflation expectations, as people expect higher energy costs to drive up both the cost of making things and the cost of moving those things from place to place.</p><ul><li>That's impacting government bond yields, as investors demand more interest to compensate for inflation eating away at the value of their money.</li><li>Those inflation expectations are also affecting stock valuations, some analysts believe — expectations for future earnings don't look as high once you take higher inflation into account.</li></ul><p><strong>Zoom out: </strong>The correlation between the price of oil and the 10-year Treasury yield is close to its strongest in five years, per an analysis from Morgan Stanley. (That means they're moving up together.)</p><ul><li>The stock/oil correlation is nearly its most negative. (Stocks move down, while oil moves up.)</li></ul><p><strong>Yes, but:</strong> Government bond yields are moving up for other reasons as well — including unsustainable deficits, geopolitical uncertainty and even the AI boom, as we've <a href="https://www.axios.com/2026/08/17/treasury-yields-warsh-bonds" target="_blank">written about before</a>.</p><ul><li>The relationship between stocks and oil can be murky. Certainly the war is driving up share prices in sectors like energy.</li></ul><p><strong>Catch up quick: </strong>The initial shock of the U.S.-Iran war clobbered stocks back in early March, but they bounced back — partly after the two sides reached a ceasefire agreement in June.</p><ul><li>Energy prices also retreated as it became clear that other forces — especially China importing less oil — were keeping them in check.</li></ul><p><strong>The bottom line: </strong>Those days may now be behind us. "For global markets the oil pain<strong> </strong>has become too great to ignore," investor Bob Elliott wrote in a note Wednesday morning.</p><h2>Bonus Chart:</h2><p><strong>The market for </strong>diesel fuel<strong> </strong>is feeling the energy squeeze most acutely. Diesel is a key input for just about anything grown or transported through the U.S.</p><p><strong>And the price</strong> of benchmark diesel futures is sitting at an all-time high of $4.73 per gallon.</p><div>Data: FactSet; Note: NY Harbor ultra-low sulfur; Chart: Emily Peck/Axios</div>
U.S. diesel prices reached a record on Monday as the war in Iran continues to disrupt global fuel supplies.
The average price of diesel in the U.S. hit a new record Friday, as the ongoing conflict with Iran and Ukrainian attacks on Russian oil refineries strain the global energy supply. The average cost of a gallon of diesel in the U.S. was up to around $6.05 on Friday morning, according to AAA. This marks…