IEA warns of global diesel squeeze as crude tops $105

Crude oil prices have surged above $105 a barrel, driven by an escalating U.S.-Iran war that has choked tanker traffic through the Strait of Hormuz and compounded by the Houthi seizure of Yemen's port city of Mocha, which has extended maritime risks into the Red Sea's Bab el-Mandeb chokepoint. The International Energy Agency's September Oil Market Report, published on September 11, painted a picture of a global oil market under acute stress, with inventories draining rapidly and a diesel squeeze pushing U.S. fuel prices past $6 a gallon for the first time.businessupturn+1

A Market Running on Fumes

ICE Brent ↘ 2.88% futures were trading around $105 at the time of the IEA's report, up roughly 45% from pre-war levels, after benchmark North Sea Dated crude spiked to $113.48 on September 9. The IEA cut its 2026 world oil supply forecast to 100.7 million barrels per day, down 5.7 million bpd year on year, with more than 10 million bpd of Gulf output still shut in amid heightened security risks. Global observed stocks have plunged 507 million barrels since February, an average draw of 2.8 million bpd that has left buffers visibly thin.businessupturn

The diesel market has tightened even more sharply than crude. U.S. diesel prices crossed $200 a barrel in wholesale terms in early September, roughly 94% above pre-war levels. At the retail pump, the national average surpassed $6 a gallon on Thursday for the first time, according to price tracker GasBuddy, as reported by Reuters Thomson Reuters Corporation ↘ 4.64%. Combined Gulf and Russian diesel exports are running 1.6 million bpd below February levels, with Gulf net diesel exports collapsing to just 390,000 bpd.reuters+1

Conflict Widens Across Two Chokepoints

The supply crisis deepened this week after Houthi forces captured the Red Sea port of Mocha on Thursday, September 10, gaining further leverage over the Bab el-Mandeb Strait, one of the world's most critical shipping routes. The seizure came after weeks of Houthi missile and drone attacks that had already halted commercial operations at the port. Combined with severe restrictions on tanker traffic through the Strait of Hormuz — which normally handles roughly 20% of global LNG flows — the twin chokepoint disruptions have forced European utilities to bid aggressively against Asian importers for Atlantic Basin replacement cargoes.investing+3

European natural gas prices reflected that pressure, with the Dutch front-month benchmark touching 79.64 euros per megawatt-hour — its highest since 2023 — before easing to around 77.60 euros on Friday, logging a fifth consecutive weekly gain of over 12%. Underground storage across Europe stood at approximately 67% of capacity, trailing the five-year seasonal average. The energy shock was a central factor in the European Central Bank's decision on Thursday to raise its deposit rate by 25 basis points to 2.5%, its second hike since June, citing acute cost-push inflation from rising energy costs.euronews+1

No Relief in Sight

The U.S. Energy Information Administration raised its 2026 Brent price forecast by nearly 5% on Wednesday, now expecting the benchmark to average about $91 a barrel for the year. The IEA's overriding message was that the market is being held together by shrinking inventories and a refining system stretched to its limit, with a full recovery in Middle East supply deferred to 2027.reuters+1