The state of the global diesel market is getting even more precarious as the Russia-Ukraine war and the Iran crisis squeeze supply from multiple angles.

Why it matters: Diesel prices ripple through economies here and abroad, affecting shipping costs, construction and plenty in between.

• The average U.S. price is up 44 cents over the last month to $5.32 per gallon, compared to $3.71 a year ago, per AAA.

Driving the news: A new S&P Global Energy analysis unpacks the ingredients behind the "big squeeze" in global refined product markets.

• S&P estimates that refineries worldwide processed 7.5 million barrels per day less crude last month than the same period in 2025.
• A separate International Energy Agency analysis out this morning also tracks an extremely steep drop in how much crude that refineries are processing.

State of play: Renewed hostilities in the Strait of Hormuz are further restricting supply after a period of optimism about normalizing flows.

• Middle East refineries are processing much less as capacity remains "physically impaired, logistically stranded, or operationally unable to restart with confidence," S&P states.
• Russia's restrictions on diesel exports following Ukrainian drone strikes on refineries have removed another 10% of seaborne supplies from the market, and China's refinery activity remains "subdued."

By the numbers: Diesel exports from Russia, the Middle East and Asia in July were 1.3 million barrels per day lower year-over-year, "equivalent to about 20% of global seaborne trade," IEA's monthly report this morning states.

"Diesel is the tightest market right now," Amrita Sen, founder of market intelligence firm Energy Aspects, tells Bloomberg TV.

Zoom in: In the U.S., the Energy Department's stats and analysis arm yesterday revised its diesel price estimates upward.

• The Energy Information Administration sees retail prices averaging $4.85 per gallon in 2026, compared to $4.61 in last month's outlook.
• It also slightly raised its 2027 forecast average to $4.07, up from $4.02.

What we're watching: The U.S. has been exporting growing amounts of diesel to the thirsty global market, but S&P points out that U.S. refineries are running at 96% of capacity.

• With the heart of hurricane season and traditional fall maintenance looming, the market's remaining buffers are very thin, the research and consulting firm notes.
• And diesel and similar refinery products are used for heating in many countries. "I think we are underestimating just how tight diesel can be this winter," said Sen.

The bottom line: "The situation is not going away anytime soon and could very well get more expensive," Mizuho Securities analyst Robert Yawger said in a note.

• "Ukrainian drone production has been increasing exponentially, with Russian energy infrastructure a prime target," he writes.
• "Unless there are big breakthroughs in the peace process around both conflicts, large amounts of diesel will remain shut in."

This ☝️ captures the U.S. price jump, though during the Iran crisis it hasn't hit the all-time high of $5.82 per gallon that AAA recorded in mid-June of 2022.

Retail sales of battery storage and heat pumps jumped in the second quarter, per the Rhodium Group and MIT researchers.

Why it matters: Rising electricity prices are likely helping the storage sector, Rhodium research analyst Harold Tavarez said, but cautioned against assigning any single cause.

State of play: "The growth in residential batteries in the first half of this year coincides with rising electricity prices outpacing inflation," he said via email, and noted investment is concentrated in Florida, California and Hawaii.

• He also cited state and utility incentive programs, and "resilience concerns" as possible factors for the storage boom.
• The picture is murkier for heat pumps, he said, and there's some seasonal variation.

Zoom in: Storage accounted for about 75% of Q2's $11.7 billion in retail spending in the wider distributed electricity and storage category, which also includes home and business spending on solar and some other tech.

• Consumer spending on electric vehicles also rose, but remains well below the 2025 peak before tax credits lapsed.

Zoom out: The retail increase was the main factor behind the rise in overall U.S. clean energy investment in Q2.

• The wider analysis also looks at manufacturing, and energy and industrial decarbonization projects.

Take it for a spin

🚗 We're quite curious about whether the Iran crisis will have long-term spillover effects on the energy transition, and this morning's monthly International Energy Agency oil report has another data point.

• The latest: The agency estimates that electric vehicles in China displaced more than 1.5 million barrels per day of road fuel demand there in the second quarter, which is 620,000 daily barrels higher than a year ago.
• State of play: Not only does China have a huge EV fleet (despite a sales slowdown this year), but the way they're being used is changing, IEA notes. Families and businesses with EVs and petro-powered cars are using the EVs more, for instance.
• The bottom line: The Strait of Hormuz crisis "looks set to hasten the ongoing structural decline" in China's motor fuel use, IEA states (h/t @annmarie).

📉 Global oil demand is expected to decline by 1.6 million barrels per day this year, IEA estimates, which is over 500,000 bpd more than its prior projection.

• Why it matters: Its latest monthly outlook signals the impact of the ongoing throttling of the Strait of Hormuz and persistently high prices.

⏸️ Via the FT, "Ukraine has halted an intense campaign of drone strikes on oil tankers using a critical Black Sea port after a request at the end of last month from US vice-president JD Vance, according to Ukrainian officials."

"The new reality is that any group with a grievance and access to inexpensive drones can stop the flow of oil these days."