Diesel squeeze set to last well into 2027 as Iran war disrupts supply, IEA says
The IEA warns that the diesel squeeze triggered by the ongoing disruptions in global supply chains, particularly from the Iran conflict, is expected to persist into 2027. This forewarning on diesel inventories raises questions about economic resilience and inflationary pressures. High wholesale prices and decreased exports signal a challenging landscape for energy markets, which could impact currencies sensitive to commodity prices. Traders should be vigilant as these shifts may create volatility in FX markets, especially for energy-exporting nations and their currencies.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). The recent insights align closely with Goldman’s anticipations of sustained inflationary pressures possibly driving exchange rates higher against a backdrop of energy supply constraints.
How firms align
Goldman is positioned in alignment with expectations of higher prices affecting trade flows and inflation, reflecting a target of 1.12. Conversely, BofA stands in contrast, forecasting a bearish outlook with a target of 1.04, likely influenced by anticipated demand destruction from high energy costs. Detailed positions can be reviewed at /reports/goldman and /reports/bofa.
What the data shows
Recent data revisions suggest that ongoing disruptions could lead to long-term inflationary impacts, with various firms updating their forecasts in light of expected higher energy prices. For deeper insights, see /research/dieselimpactanalysis.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Diesel inventories may not recover until 2027, impacting global energy prices.
- 02Watch for volatility in currencies tied to energy exports.
- 03Inflation risks intensify, particularly for commodity-sensitive currencies.
- 04Market positioning may adjust ahead of key inflation releases.
Market implications
Investors should monitor levels around 1.075 in EUR/USD, particularly as inflation data is released. A breach of key resistance or support levels influenced by energy prices could lead to rapid adjustments in positioning across the board.
Risks to this view
A swift resolution to the Iran conflict or unexpected increases in diesel supply could mitigate inflation fears, leading to a reversal in the current FX positioning. Traders should keep an eye on geopolitical developments and OPEC+ responses.
Sentiment by currency
USD+EUR JPY+GBPComposite USD score: +0.65
Sources & References
How we cover this story