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 ofdeVere 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.
AdvertisementTensions 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.
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.
He argues the short-term appeal is obvious.
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.
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