A key index of oil prices rose to its highest level in five months on Friday, as investors assessed the impact of Iran’s wars with Ukraine and Russia on global energy supplies.
Brent crude oil, widely considered one of the world’s most important energy prices, surpassed $110 a barrel shortly after 2:30 p.m. ET, its highest level since May.
U.S. crude oil, which also drives gas prices, jumped 3.5% on Friday to close at $101.41 a barrel. It was the first time since September that West Texas Intermediate crude crossed the $100 threshold, closely watched by traders and the public.
Friday’s price increases will likely add to already high gasoline prices for U.S. consumers in the coming days. As of Friday morning, regular gasoline averaged $4.32 per gallon nationwide.
Diesel futures also jumped more than 1% on Friday. The cost of this essential commercial fuel for agriculture and other industrial sectors has increased even faster than regular gasoline in recent months.
Stocks fell Friday, partly in response to rising energy prices. The S&P 500 fell more than 1% while the Nasdaq Composite fell sharply by 2% by mid-afternoon.
Global fuel prices began rising steadily this spring, when the United States and Israel attacked Iran in late February, prompting the closure of the Strait of Hormuz.
But the escalation of the war between Russia and Ukraine in recent months has caused diesel prices to spike even more dramatically.
Russia is traditionally one of the world’s largest exporters of diesel. But the attack by Ukrainian forces on its energy infrastructure has knocked out much of its refining capacity. Likewise, energy assets in Ukraine have been targeted by Russian strikes.
As a result of the strikes, buyers of Russian diesel were forced to look elsewhere for their fuel supply.
But there are no clear opportunities to easily expand diesel production. Refineries in the United States and Europe are already operating at maximum capacity to produce as much diesel fuel as possible.
President Donald Trump is intensely focused on the high cost of diesel fuel because of its key role in driving up inflation – a major issue for American voters in the November 3 midterm elections.
Trump has pressured U.S. allies to release some of their diesel and crude oil reserves, and he recently signed an order to ease regulations on the use of off-road “red dye” diesel.
Since none of these actions resulted in a significant drop in diesel prices, Trump made the decision this month to ease U.S. sanctions on Russia.
The aim was to allow Russian President Vladimir Putin to market part of Russian supplies on the world market.
But the sanctions relief stunned world leaders and drew swift condemnation from U.S. lawmakers of both parties.
While Trump presented the deal with Putin as a way to lower prices, as of Friday, no Russian diesel had been identified as having reached the global market.
Russian refining infrastructure was seriously damaged by the Ukrainian strikes. Another Russian refiner suspended some crude oil operations on Friday. Russia’s Defense Ministry said Ukraine had “attempted a massive attack on the Ryazan oil refinery.”
Additionally, a group of US lawmakers introduced a bill that would block Trump’s Russian diesel deal. It has little chance of passing the Republican-controlled House.
But polls indicate that Republicans are unlikely to retain a majority in the House after the November election. Russia’s diesel blockade bill offers a glimpse of the type of legislation that could advance under Democratic control.
Yet even today, the legislation adds “to growing doubts about the success of a U.S.-Russia diesel deal,” said Mason Mendez, global real assets analyst at Wells Fargo.
“Investors also remain concerned about further military escalation in the Middle East, as attacks on commercial shipping and regional infrastructure have increased in recent weeks,” he said.
“By 2027, the need to replenish depleted global stocks could create an additional source of demand and keep energy prices higher for longer. »
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