Diesel is rising mainly because of geopolitical tensions in the Middle East, including the ongoing U.S.–Israeli conflict with Iran, which has disrupted crude flows and raised risk premiums on refined products. Tight refinery capacity and strong demand from both freight and industrial users have amplified the move, turning a regional supply shock into a global price spike.
The Fed’s Wednesday rate hike is evidence of how policymakers are biased toward using rate increases to tackle inflation stemming from oil‑supply shocks, a mistake, as per some observers.
Record diesel prices therefore present a headwind for gold, bitcoin and technology stocks. Like gold, bitcoin is widely seen as a store of value and sovereign hedge. However, historically, higher borrowing costs have weighed on the cryptocurrency’s market value, as seen during the 2022 Fed tightening cycle.
On Thursday, the Fed hikes rates by 25 basis points, lifting the benchmark borrowing cost to the 3.75%-4% range. Goldman Sachs and Morgan Stanley expect another 25 bps hike in October.
Other central banks are also tightening. The European Central Bank recently hiked rates, and the Bank of Japan (BOJ) is expected to do the same on Friday.
