Five months after the United States and Israel launched a military campaign against Iran, global fuel markets remain unsettled, according to the latest data from the International Energy Agency (IEA).

The IEA's monthly end-use price tracker, updated on August 7 and covering prices through July, shows the average per-liter cost of automotive diesel across tracked countries at approximately $1.94 in U.S. dollar terms. That figure is roughly 14% above its February level, before the conflict began, and is higher than June's reading despite crude oil continuing to slide through much of the summer.

Gasoline tells a calmer story. The average pump price peaked in May near $1.99 per liter and has since eased to $1.90, essentially flat month over month. Diesel, by contrast, has proven more resilient — a distinction with significant economic implications, since diesel powers the bulk of global freight transport, agricultural machinery, and industrial equipment, making it a key input cost that feeds through to goods prices broadly.

The divergence traces back to February 28, when U.S. and Israeli strikes killed Iran's supreme leader and triggered a war that sent Brent crude soaring from approximately $72 a barrel to nearly $120 within weeks — the sharpest one-month jump for the benchmark since the 1990 Gulf War. Tanker traffic through the Strait of Hormuz, which carries roughly a fifth of the world's oil, came to a virtual halt as insurers withdrew coverage and Iran threatened to target any vessel attempting passage.

Crude has since retreated considerably. Brent traded near $88 a barrel this week, down from spring highs but still more than 30% above year-ago levels. J.P. Morgan now projects Brent to average $86 in the third quarter and trend toward $78 by year-end, assuming the conflict does not intensify. OPEC+ has been gradually unwinding voluntary production cuts, but those incremental barrels have done little to offset the supply anxieties tied to the Gulf standoff.

That assumption remains uncertain. Iran and Oman continue negotiating terms for a full reopening of the Strait of Hormuz, and the talks have driven price swings for weeks. A June 17 memorandum of understanding between the U.S. and Iran collapsed within days over shipping-route disputes, and attacks on tankers and Saudi Arabia's Jazan refinery persisted through early August.

The IEA's country-level breakdown reveals how unevenly that volatility has been distributed. Germany's diesel and gasoline prices each jumped more than 10% in July alone, though crude was not the sole factor — Berlin's temporary fuel-tax discount, introduced in May at nearly 17 cents per liter to cushion the war's impact, expired on June 30. Poland experienced an even sharper increase.

Conversely, pump prices actually declined in the United Kingdom, Ireland, Sweden, and Cyprus — a reminder that national tax policies and currency movements can matter as much as crude prices themselves. European governments have been under particular pressure to shield consumers and businesses from energy-driven inflation, which had only recently receded from the multi-decade highs of 2022–2023.

Diesel's persistence at elevated levels in July also reflects tighter distillate supply. Ukraine struck Russian refineries with drone attacks at least 30 times in July alone, pushing Russian crude-processing rates to a 24-year low and triggering fuel rationing in approximately 90% of the country's regions. That has constrained global diesel and other middle distillate supplies even as gasoline supply held up better.

In the United States, the IEA figures place diesel at approximately $4.96 per gallon in July and gasoline at $3.93, both well above year-ago levels of $3.78 and $3.12, respectively. The $1.18-per-gallon increase in diesel year over year translates directly into higher operating costs for trucking fleets, which move roughly 70% of domestic freight tonnage.

Whether those numbers decline further depends less on OPEC+ output decisions than on what transpires next in the Gulf.

By Michael Kern for Oilprice.com