Published September 11, 2026
While almost no one drives diesel-fueled passenger vehicles in the U.S. every person in America is impacted by the rising price of diesel fuel. Perhaps you have seen the recent news that diesel prices have hit an all-time high, rising to $6 per gallon. This is extraordinary given that a year ago, diesel was under $4 per gallon.
First, let’s review the reasons why diesel prices shot up so dramatically and then explore the impact.
Not surprisingly the Ukraine-Russia war and the war with Iran are the key drivers. Russia has traditionally been an enormous exporter of diesel fuel and the amount of oil coming out of the Middle East has fallen by over 90%. While the U.S. has continued to ramp domestic oil production, the light sweet crude produced domestically is more suitable for gasoline than diesel and therefore not so helpful in this case. It turns out that everything about diesel is more expensive: the refining process, the excise taxes, and even the oil itself.
Around the world, businesses of all types are still highly dependent on diesel fuel. Diesel fuels ocean tankers and container ships, passenger and freight trains, buses, long haul trucks, farm and agricultural equipment, and a wide array of industrial equipment and machinery.
When considering the consumer impact, the first most obvious impact is cost of food, especially refrigerated food including milk, eggs, butter, cheese, yogurt, produce, and meats. While we buy our produce at room temperature in the supermarket, that produce is stored and shipped (almost entirely by trucks) in refrigerated environments. The double whammy is that not only did the diesel for those trucks shoot up from $4 per gallon to $6 per gallon but those trucks use refrigerated trailers that also run on diesel to keep the food cold. Suffice to say that the transportation cost increase alone has driven up the average cost of groceries by over 10% and that doesn’t even include the rancher’s / farmers cost increases due to their rising cost inputs for feed, fuel for farm equipment et cetera. Most companies have 6 month or year-long contracted transportation contracts with fixed rates, which means that market price increases in diesel fuel aren’t felt immediately, and often take effect in 6-12 months time. Rest assured, more price increases are coming and they won’t be going away anytime soon.
If you are interested in tracking the impact on fuel prices due to the war with Iran, Brown University has set up a convenient tracker:
https://iranwarcost.watson.brown.edu/
Market Update
Stocks had a rough week punctuated by both a sharp rise in global oil prices and interest rates.
On Tuesday, stocks fell in reaction to the spike in oil prices as hostilities escalated over the Strait of Hormuz with the U.S. bombing multiple Iranian-flagged oil tankers. Notably, Intel (INTC) was up 9% on a deal to make custom chips for Amazon (AMZN). The S&P500 fell 0.6% while small cap stocks fell 0.5%. The NASDAQ 100 fared better, only losing 0.3%.
Wednesday was another losing day for stocks. The U.S. Treasury attempted to tame interest rates with another $6 billion purchase of U.S. bonds in the open market. Unfortunately, this had the opposite effect, sending rates higher as global bond investors increasingly see this type of intervention as a further sign of stress in the U.S. economy. The S&P500 fell 0.5%, the NASDAQ was down 0.6% and the Russell 2000 tanked 1.3%. Apple released a slew of new products including a $2,000 foldable iPhone to a mostly warm reception however most of Apple’s new products don’t hit store shelves until 2027.
Thursday brought yet more selling, with a huge spike interest rates setting the tone. The Producer Price Index came in hot at 5.4% vs 5.3% expected, further cementing that that Fed needs to hike rates to tame inflation. The U.S. 10Y treasury note yield flew over 4.9% and oil surged to over $100 per barrel. Investors, despite very rosy earnings forecasts for the 3rd quarter, sold stocks across the board, with the Russell 2000 leading the losses, closing down 1% while the rest of the indices all closed down around 0.6%.
The Consumer Price Index (CPI) inflation data came in at 3.4% on Friday, matching expectations but bringing the odds of a Fed rate hike to over 86%. Oversold stocks staged a relief rally with 8 S&P sectors gaining ground. Healthcare and utilities were the laggards closing with modest losses on the day. Notably, interest rates dipped in the morning but still closed higher with the 10Y treasury yield closing at 4.975%, dangerously close the psychologically significant 5% level.
For the week, stocks closed lower. The NASDAQ 100 was the relative winner only losing 0.6%. The S&P500 was not far behind with a 0.8% loss. The Russell 2000 has a bad week, closing down 2.4%
Warm wishes and until next week.