Energy Markets: Trump Threatens New Iran Strikes, Russia Bans Diesel Exports, Crude Oil Surges 5% to Multi-Week High

International oil prices closed sharply higher on Wednesday (8th), driven by renewed U.S.-Iran tensions, expanding shipping risks in the Strait of Hormuz, and Russia’s announcement of a ban on diesel exports. Both Brent crude and West Texas Intermediate (WTI) reached their highest levels in several weeks.

Brent crude settled at $78.02 per barrel, up $3.86 (5.2%); WTI closed at $73.52 per barrel, rising $3.08 (4.4%). During the session, both benchmark crude oils surged nearly 9%, though gains slightly narrowed by the close. Still, it marked one of the largest single-day rallies in recent months.

U.S. President Trump stated that the transitional agreement signed last month to end U.S.-Iran hostilities had “ended,” and hinted that U.S. forces might launch fresh airstrikes on Iran that evening in response to Iranian attacks on U.S. military bases in the Persian Gulf and oil tankers in the Strait of Hormuz. He later clarified he did not intend to restart full-scale war, causing oil prices to retreat slightly from intraday highs. However, markets still perceive the Middle East situation as having re-entered a phase of high uncertainty.

Analysts note the Strait of Hormuz accounts for about 20% of global seaborne oil supply. Since U.S. and Israeli military actions against Tehran in late February, Iran has continued pressuring vessels transiting the area, significantly increasing shipping risks. The renewed conflict has prompted more shipowners to reassess whether they are willing to pass through this critical energy corridor, raising concerns that Middle East oil exports could face renewed disruptions.

RBC Capital Markets warned the latest round of conflict could further reduce the number of vessels willing to transit the Strait of Hormuz, increasing the risk of global energy supply disruptions. Jorge Leon, Head of Geopolitical Research at Rystad Energy, noted that recent events have severely undermined market confidence that the current 60-day ceasefire could evolve into a permanent peace agreement.

In addition to Middle East tensions, a diesel supply crisis also pushed energy prices higher. The Russian government announced an immediate suspension of diesel exports until the end of July to stabilize domestic fuel supplies. This move follows Ukraine’s ongoing drone attacks on Russian refineries, oil infrastructure, and tankers in the Sea of Azov, which have tightened domestic gasoline and diesel supplies and driven up prices, forcing the government to prioritize domestic demand.

Following the announcement, U.S. ultra-low sulfur diesel futures surged over 14% intraday, closing up 11.6%—reaching a one-month high and marking the largest single-day gain since March 2022. European diesel crack spreads also rose, while the U.S. “3-2-1 crack spread,” a key indicator of refining profitability, soared to the highest level since LSEG began tracking data in 2001, signaling extreme tightness in global diesel supply.

Russian and Ukrainian officials confirmed that Ukrainian forces attacked three Russian refineries, a tanker in the Sea of Azov, and multiple oil pumping stations overnight, with strikes reaching as far as the Ural Mountains. This has heightened market concerns over Russia’s energy export capacity.

The U.S. Energy Information Administration (EIA) released inventory data showing mixed signals. As of last week, U.S. crude oil inventories unexpectedly increased, but distillate inventories—including diesel and heating oil—fell by nearly 5 million barrels. Strong domestic demand and sustained high export levels have continued to tighten diesel supply, further supporting price strength.

Meanwhile, China announced it would ease July refined oil export restrictions, allowing more refiners to resume exports. This is expected to increase supplies of diesel, gasoline, and jet fuel in Asia, potentially alleviating regional fuel shortages. However, analysts believe that with Russia’s export ban and Middle East tensions persisting, the global diesel market will remain extremely tight in the short term, and oil price volatility is likely to intensify further.