Middle East is likely to impact diesel prices across Europe

The military escalation involving the United States, Israel, and Iran that began this weekend has sent shockwaves through global energy markets.

Tensions have primarily focused on the Strait of Hormuz, a crucial shipping lane accounting for approximately 20% of global seaborne oil traffic.

Market traders are increasingly worried about potential disruptions to shipping flows.

As trading opened, benchmark crude oil prices jumped by around 10-12%, briefly pushing Brent Crude Oil above $80 per barrel.

Analysts indicate that diesel markets are particularly sensitive to geopolitical tensions. Prices often rise quickly in response to negative news but typically decline more slowly once tensions ease.

Market analysts have outlined three potential scenarios for European energy markets:

Rapid De-escalation: Brent stabilises around $80-85 per barrel, though a geopolitical risk premium may persist through the summer.

Medium-term Disruption: Prices could rise toward $90-100 per barrel, resulting in fuel price volatility and added inflationary pressure.

Extended Maritime Disruption: Should exports from the Gulf be significantly restricted, crude prices could exceed $125 per barrel, triggering sharp increases in diesel prices and negatively impacting European supply chains.

Christian Dolderer, Lead Research Analyst at Transporeon, a Trimble Company said: “The military escalation between the US, Israel and Iran, which began this weekend, has sent an immediate shockwave through global energy markets.

“With the Strait of Hormuz, responsible for roughly 20% of global seaborne oil traffic, effectively under blockade, European fuel markets are bracing for significant cost pressure.

“When trading opened today, Brent crude jumped 10–12%, briefly moving above $80 per barrel.

“It’s no secret that diesel markets are particularly sensitive to geopolitical shocks. Prices typically rise quickly on bad news and fall only gradually once tensions ease. European fleet operators are now facing the prospect of crude moving toward $100 per barrel, which could translate into a €0.12–€0.15 per litre increase in raw material costs and retail diesel price rises of €0.20–€0.30 per litre within weeks.

“Oil market analysts see three scenarios emerging in Europe. A quick de-escalation could stabilise Brent at $80–$85, though a structural “war premium” may persist through summer.

“A mid-term disruption pushing Brent to $90–$100 would keep pump prices volatile and add inflationary pressure. Finally, sustained closure of the Strait would trap Middle Eastern exports and shake the oil market, potentially driving crude past $125 per barrel and triggering skyrocketing diesel prices, impacting the European supply chain channels.”