Fuel price shock anatomy
Market Monday - Week 27 - How recent events almost caused another cost crisis at the transport market
The direct military exchange between Israel and Iran in June 2025, which saw an Israeli strike on Iranian facilities and retaliatory Iranian attacks, marked a significant escalation in a long-running conflict in the region. But the shift from proxy conflicts to direct state-on-state confrontation sent an immediate shockwave through global energy markets, which,as markets often do, reacted not to the immediate loss of supply, but to the perceived risk of a disruption at one the world's most critical energy hubs at the Persian Gulf.
Market anxiety was heightened by the possibility of Iranian blockade of Strait of Hormuz, the only way out of the Gulf for numerous oil-carrying mega-tankers. Despite a consensus of geopolitical and energy analysts that a sustained blockade was highly improbable, fuel markets reacted quickly, hedging risks not from the most probable, but from the most damaging scenario. High-frequency trading algorithms, programmed to scan news feeds for market-sentiment keywords, played a role in rocking the figurative energy boat by posting numerous quick buy orders, creating a rapid, self-reinforcing price surge that outpaced sober human analysis. The result was a classic fear-driven spike, where the market priced in the catastrophic "tail risk" of a supply disruption long before any such disruption actually occurred.
The price action of Brent crude, the international oil benchmark, perfectly illustrated this cycle of fear, peak panic, and eventual return to fundamentals. Data from the U.S. Energy Information Administration (EIA) provides a granular timeline of the market's turbulent month. As of today, 30th of June, Brent trades around US $67 / Bbl
More importantly, according to trading data from wholesale commodity exchanges, wholesale diesel prices reacted even more dramatically. Stable prices in the first week of June near or just above the €615/mt mark surged dramatically mid-month in response to the conflict and oil developments up to a peak of over €800/mt, representing an increase of more than 30% in just a few days, significantly outstripping the ~20% rise in Brent crude oil price. As it became clear that oil tankers were still transiting the Strait of Hormuz unimpeded, the fear-premium evaporated. The correction was swift, and wholesale diesel prices retreaded at the end of the month trading at around €675/mt.
The June 2025 crisis was another classic, sentiment-driven, and ultimately short-lived event
This amplification of volatility in Europe is not random; it is rooted in the structure of the refined products market, as a panic-driven rush by refiners, distributors, and large industrial users to secure physical diesel supply creates a "bullwhip effect," where a small change in demand at the beginning of the supply chain causes progressively larger swings in orders and prices further up the chain.
A smaller decline from peak to values above early June indicates an opportunistic behaviour to increase profitability of turning crude oil into finished products and distributing it. It reminds us again, that the fear of a product shortage can drive the price of diesel up much faster than the price of its raw material, crude oil, as refiners and traders price in the heightened risk of securing and delivering the final product. Fortunately, the June 2025 oil price peak was such a short one, that retail prices have not had enough time to react dramatically. At-pump diesel fuel prices in Europe reached an approximately +7% increase, according to the most recent EU Oil Bulletin data, and are projected to decline slightly in the coming weeks.
The freight market in Europe survived with a minor scare, for now.
Oleksandr Kulish
Senior Consultant