Trump’s diesel gamble could detonate a global inflation shock weeks before midterms
A US ban on diesel exports could ignite a global inflation firestorm and send it roaring straight back onto American forecourts just as voters head to the polls, warns the CEO of deVere Group, one of the world’s largest independent financial advisory organisations, as oil prices explode higher after Washington slammed the door on Tehran’s offer to reopen the Strait of Hormuz.
The comments from Nigel Green come as Brent rocketed almost 3% to above $107 a barrel in Asian trading, while US crude surged close to 2% to more than $94.
President Trump has rejected Iran’s conditional proposal to reopen the waterway and resume nuclear talks within seven days, a deal that hinged on Washington lifting its naval blockade and releasing frozen Iranian assets.
He’s reported to have told aides he expects US strikes to resume once November’s midterms are over.
Tensions escalated further as the Saudi-led coalition in Yemen reported intercepting projectiles fired by Iran-backed Houthi rebels.
Now the White House is openly weighing curbs on diesel exports, with a 90-day ban reportedly among the options.
Trump himself has conceded the move could nudge gasoline prices higher.
Nigel Green says: “Washington has its hand on the most dangerous lever in the entire energy system.
“Diesel moves the world. It fuels the lorries, the tractors, the freight trains and the factory generators. Choke it off and every price tag on the planet feels the shockwave.”
US retail diesel is hovering around $6.50 a gallon, a whisker below the record $6.53 set on 22 September. Global markets are already missing at least 1.3 million barrels a day of diesel from Russia and the Gulf, leaving America as the supplier of last resort. It’s provided roughly half of Europe’s diesel imports in recent months.
The mere threat of a ban sent Europe’s diesel premium over Brent rocketing above $95 a barrel last week, a record in data going back to 2011.
“Would Trump really pull this trigger five weeks out from the midterms?” asks Nigel Green.
“He’s admitted himself it could push gasoline higher. Farmers are already buckling under record diesel costs. Truckers, households and swing-state voters feel every cent at the pump.
“A ban that backfires in late October would be a political own goal of historic proportions.
“And yet the pressure to be seen doing something is ferocious.
“Desperate politicians do desperate things, and markets would be reckless to rule it out.”
He argues the short-term appeal is obvious.
“Keep the fuel at home and pump prices might ease for a few weeks. Then refiners rebalance, gasoline gets squeezed, and the spike boomerangs back across the Atlantic onto American drivers.”
Europe sits directly in the blast zone. Eurozone inflation hit 3.3% in August, its highest in three years, with energy prices up 14.3% on the year.
The European Central Bank has already resumed raising rates and has slashed its growth forecast for the bloc to just 0.8%.
The US energy industry has pushed back hard, with its main lobby group warning restrictions would deepen refining problems and ultimately hurt consumers. European traders, for their part, largely doubt a ban will materialise.
“Energy relief is being pinned to an election date,” says the deVere CEO.
“The conflict is supposed to wind down after November and oil is supposed to follow. If strikes resume instead, as reported, today’s prices could prove to be only the opening act.
“Portfolios built on falling inflation and a steady run of rate cuts need stress-testing against a world where energy stays brutally expensive for much longer.
“Proper diversification, resilience, and a clear-eyed view of inflation exposure count for far more than trying to guess Washington’s next move.”
He concludes: “Diesel is the fuse on this crisis, and Washington is holding the match. Election nerves could strike it before November. Renewed strikes on Iran could strike it after.
“Either way, every major economy on earth is exposed to the potential fallout.”