Middle East conflict disrupts supply chain, with diesel surging to a new high since the summer of 2023 compared to crude oil.

With the threat of Middle East conflict affecting global supply, the premium of diesel over crude oil has reached its highest level since the summer of 2023. Earlier on Tuesday, the European benchmark diesel futures price was over $40 per barrel higher than crude oil. Data shows that this premium (known as the "crack spread") has reached the widest level in two and a half years. At the same time, the premium of diesel over crude oil has also significantly increased in the United States and Asia. Driven by a broader rise in oil prices, the price of diesel has surged significantly. As of the time of writing, Brent crude oil futures have risen by over 7%, reaching $83.61 per barrel. In Europe, the futures price for delivery in March has surpassed $1000 per ton, equivalent to over $134 per barrel. Its increase has exceeded that of Brent crude oil, reflecting the importance of the Middle East as an important diesel export region and a major source of supply for other refineries. The conflict in the Middle East has disrupted the supply chain, leading to a sharp increase in the premium of diesel over crude oil. Janiv Shah, Vice President of Commodities Markets at Rystad Energy, stated that the supply of diesel from Asian refineries to Europe is currently facing "serious risks", as these refineries have previously sourced crude oil from the Persian Gulf. He added, "The transportation of finished oil products from the Persian Gulf to Europe also faces risks." It was reported that Commander of the Islamic Revolutionary Guard Corps of Iran, Jabari, stated in a live TV broadcast that any ships attempting to pass through the Strait of Hormuz will be destroyed, "We will not allow a drop of oil to flow out of the region." Additionally, there have been reports that currently no oil tankers have passed through the Strait of Hormuz, with three British and American tankers being attacked in the Persian Gulf and the Strait of Hormuz. The Strait of Hormuz connects the Persian Gulf and the Gulf of Oman, and is a crucial route for the export of crude oil from oil-producing countries in the Middle East such as Saudi Arabia, Iraq, Qatar, and the United Arab Emirates. Approximately one-fifth of the world's oil and liquefied natural gas is typically transported through this strait. Multiple ship owners and traders have currently suspended the transportation of crude oil, fuel, and liquefied natural gas through this strait. According to data from the International Maritime Traffic System, the speed of oil tankers in the waters around the Strait of Hormuz has generally decreased to zero, indicating a standstill in shipping in the region. In addition, several European governments have issued emergency instructions to their oil tankers flying their national flag on routes through the Strait of Hormuz, requiring them to strictly avoid the strait to mitigate the security risks posed by the escalated situation. Furthermore, shipping costs are also soaring. On Monday, the freight cost of transporting oil products from the Persian Gulf to Northwestern Europe rose to the highest level since 2024. In response to the shipping issues, some Asian refineries are considering reducing their operating rates, which will further exacerbate supply chain pressures.