Diesel Hits Record $5.85 as Iran Conflict Disrupts Supplies

US diesel prices climbed to an all-time average of $5.85 per gallon this week, surpassing previous peaks tied to earlier supply shocks. The rise stems directly from disruptions in global oil flows after the US and Israel launched operations against Iran in late February, which led to the effective closure of the Strait of Hormuz. That narrow waterway carries a large share of the world's crude exports, and restricted passage has pushed wholesale oil costs higher since the conflict began.

Diesel powers most commercial transport in the United States, including trucks, trains, farm equipment, and construction vehicles. Higher fuel expenses have already translated into increased shipping costs for goods ranging from produce and meat to clothing and household items. Several retailers have added surcharges to online orders and mail deliveries, passing part of the burden to customers. Grocery stores face particular pressure because perishable items require frequent restocking and often rely on diesel-powered harvesting and distribution networks.

Regular gasoline prices have also increased, though at a slower pace, reaching an average of $4.15 per gallon compared with $3.20 a year earlier. Before the Iran conflict, diesel averaged around $3.76 nationally. The current level exceeds the high recorded after Russia's invasion of Ukraine, according to data from the American Automobile Association.

In response, the Trump administration announced an oil development agreement with Venezuela aimed at expanding production. The deal covers 17 strategic fields with an estimated 65 billion barrels of reserves and projects more than $100 billion in new investment along with $209 billion in taxes for Venezuela. The US government would hold 55 percent control in a joint venture with a private operator. Venezuelan interim President Delcy Rodríguez described the arrangement as a path to greater output that could eventually ease domestic price pressures.

Analysts have expressed doubt about the agreement's near-term impact. Venezuela's oil sector has long faced chronic underinvestment, infrastructure decay, and policy barriers that have discouraged foreign capital even during periods of high global prices. Past nationalizations and contract disputes continue to raise questions about whether promised inflows will materialize on the scale needed to offset current shortfalls.

The price increases coincide with the approach of November midterm elections, when voters will assess economic conditions including transportation and food costs. Supply constraints created by the Hormuz closure have no quick domestic substitute, and commercial users cannot easily switch fuels in the short run. Businesses report absorbing some expenses initially but shifting more to customers as the pressure persists. Economists tracking these developments note that such pass-through effects follow standard patterns when input costs rise sharply across an industry.

The administration has signaled continued military and economic measures against Iran while pursuing the Venezuela arrangement. Market participants continue to monitor both developments for signs of relief in crude supplies.