Fuel markets hit record tightness amid Hormuz escalation, threatening higher pump prices

Global fuel markets have tightened to record levels as renewed Middle East conflict and tanker attacks in the Strait of Hormuz raise supply concerns, threatening to push gasoline and diesel prices higher at the pump. The escalation follows the collapse of the U.S.-Iran truce and coincides with reduced Russian fuel exports due to Ukrainian strikes on refineries. Gasoline, diesel, and jet fuel prices have surged faster than crude oil prices throughout the Iran conflict, fueling inflation and keeping central banks and consumers on edge. Global fuel supplies were already constrained before the latest conflict, with refiners forced to cut processing rates when Persian Gulf crude stopped flowing, particularly in Asia. The situation has worsened as refineries prepare for seasonal maintenance, further reducing capacity. The United Arab Emirates reported two of its tankers were struck while transiting the Strait of Hormuz, adding to a series of recent attacks in the waterway. Analysts warn that lower refinery utilization in recent months stems from insufficient crude supply, preventing refiners from increasing output. In Europe, diesel refining margins hit their highest level since at least 2011, while in the U.S., the 3-2-1 crack spread—a measure of refining margins—has surged to a record even as refineries operate at high capacity. A heat wave across Europe may force some refineries to reduce crude processing, compounding supply pressures. Over the past few years, multiple refineries in the U.S. and Europe have shut down, further tightening the market. The Strait of Hormuz remains a critical chokepoint, with shipping through the region largely frozen amid ongoing tensions.