Mounting fears that widening clashes in the Middle East could further disrupt energy supplies briefly pushed the price of oil to about $110 a barrel on Friday, while U.S. diesel prices rose above $6 a gallon.
The jump in fuel prices has stoked fears of broader inflation. On Friday, a report showed overall inflation in the United States remained elevated at an annual pace of 3.4 percent.
Concerns over oil supplies, already heightened by the U.S. war against Iran, broadened this week with reports that the Houthi militia had seized a critical port on the Red Sea, presenting a new threat to shipping in the area.
The price of Brent crude oil, the international benchmark, surged before easing to about $103 a barrel, after the International Energy Agency lowered its forecast for global oil demand by 2.5 million barrels a day this year, from a drop of 1.6 million barrels a day it predicted last month.
“The continuing impasse in negotiations between the United States and Iran delays the prospect of a normalization of flows into next year,” it said, adding that demand for oil is expected to rebound in 2027, “narrowly offsetting this year’s losses.”
West Texas Intermediate crude, the U.S. standard, traded as high as $104 a barrel before falling to about $99.
But the rise in oil prices “pales in comparison with those for refined products, where market tightness is now most acute,” the I.E.A. wrote in its report.
The average price of a gallon of diesel fuel jumped to $6.06, according to the AAA motor club, a 60 percent rise since the United States and Israel attacked Iran on Feb. 28.
Iran has effectively blocked most ships from passing through the Strait of Hormuz, the narrow waterway between the Persian Gulf and the Gulf of Oman. During normal times, about a fifth of the world’s crude oil flows through the strait.
With assistance from the U.S. Navy, a few tankers have been able to get through, but Iran has signaled in recent days that it was willing to be more aggressive in exerting control over the strait.
U.S., European, African and Asian oil refineries have increased production of diesel, gasoline and other fuels to make up for the loss of supplies from the Middle East and Russia, where refineries have come under attack by Ukraine.
But demand for energy is still outstripping supply. As a result, governments, businesses and farmers are having to pay more for the diesel they need to run trucks, farm machinery and other heavy equipment.
And homeowners who use heating oil, which is similar to diesel, are growing concerned about their monthly bills as winter nears. Prices for heating fuel are up 52 percent year over year, according to the August inflation report.
Fuel accounts for as much of 30 percent of food costs in the United States, said Kate Gordon, a former senior adviser in the Department of Energy and now the chief executive of California Forward, a nonprofit business group.
“So far, farmers and trucking companies have been absorbing a lot of this cost increase,” she said, “but with the war continuing on with no end in sight, they are going to pass through more and more of the price jump to consumers.”
Oil remains elevated.
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The price of Brent crude, which has been edging higher all week, was trading at about $104 a barrel.
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West Texas Intermediate crude, the U.S. benchmark, was around $99 a barrel.
Bonds yields rise.
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The yield on the 10-year Treasury bond remained elevated at 4.91 percent on Friday, as investors feared that higher energy prices would stoke broader inflation.
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The 2-year Treasury yield, which acts as a barometer of what investors expect the Federal Reserve to do, inched higher to 4.58 percent.
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The recent rise in yields come as governments borrow more money and tech giants use debt to finance the building out their data centers.
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Some factors pushing up bond yields will dissipate, Goldman Sachs said in a research note, but concerns over fiscal deficits will linger. “The lack of a move higher in volatility makes it hard to claim that we’re fundamentally mispriced,” said George Cole, a Goldman analyst, said in a webinar.
Stocks are mixed.
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The S&P 500 opened higher when stocks resumed trading in the United States on Friday. Investors shrugged off an inflation report released earlier in the morning that showed price pressures remained elevated.
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Stocks in Asia, where countries import vast quantities of oil and gas, were lower. Japan’s Nikkei 225 and South Korea’s benchmark KOSPI fell nearly 2 percent.
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In Europe, the Stoxx 600, a broad index that tracks the region’s largest companies, rose about 1 percent.
Gasoline prices rise.
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The national average for gas prices rose to $4.30 a gallon, according to AAA. The price has risen 44 percent since the war began.
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Gas prices don’t move in lock step with crude, usually trailing increases or drops by a few days.
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