In just eight months, chartering a supertanker has become more expensive than launching a rocket into orbit: moving crude from the US to China costs about $80m — nearly $6m more than a SpaceX Falcon 9 launch, Bloomberg reported last month. In early 2026, that was enough to buy a near-identical tanker outright. Freight now costs nearly half as much as the oil itself.
Yet freight is only the visible part of the shock. The real damage lies further down the value chain, where lost refinery capacity is driving diesel prices sharply higher, feeding into inflation and interest rates, and potentially even the AI boom.
As journalist Max Fisher noted in a recent The Bigger Picture podcast, the initial oil shock has evolved into three separate energy-market disruptions.
The US-Israel war with Iran that began in late February choked the Strait of Hormuz, which normally carries about a fifth of the world’s oil. Producers quickly rerouted crude through bypass pipelines, more than doubling exports from the Red Sea and the Gulf of Oman.
But since July, Iranian-backed Houthi attacks on Saudi infrastructure and Red Sea shipping have created a second chokepoint at Bab el-Mandeb, the Red Sea’s southern exit. Most crude still flows, but rerouted tankers take far longer to arrive and cost much more to insure, adding a hefty premium to the final price.
The third disruption — to refining capacity — matters most for inflation and interest rates.
Iranian strikes and Houthi attacks have damaged regional refining capacity, repeatedly knocking Saudi Arabia’s 400,000-barrel-a-day Jazan refinery offline for weeks at a time.
The International Energy Agency estimates that Ukrainian drones have hit a Russian refinery roughly once every three days this year, forcing half of Russia’s largest diesel producers to cut output. Moscow has partly lifted its own export ban under a deal with Washington, but with refineries still under attack it has little spare diesel to send. China has banned fuel exports too.
Saudi Arabia and Russia are both major diesel exporters, so simultaneous outages remove a disproportionate share of globally traded supply.
The result is that refined products are now far scarcer than crude. A refiner’s margin, or “crack spread”, is the gap between the price of crude and the diesel, petrol and jet fuel made from it. Normally the two move in tandem, keeping the spread fairly stable. But while crude can be rerouted around a chokepoint, refining capacity cannot, so refined product prices have decoupled from crude. By early October, US distillate stocks (including diesel, jet fuel and heating oil) were at their lowest for this time of year, while diesel margins remained close to record highs.
As Reserve Bank chief economist Konstantin Makrelov noted in last month’s Monetary Policy Review: “The story is not only about oil prices. It is also about refinery margins.”
A ceasefire or the reopening of Hormuz would send crude prices tumbling, but it would do nothing to repair refineries. Until plants in the Middle East and Russia are back online, and Moscow and Beijing resume fuel exports, diesel will remain expensive, regardless of what happens to the price of crude.
Why diesel is different
Makrelov drew another critical distinction: petrol matters for consumption, diesel for production. Diesel moves freight, powers tractors, harvesters and mining fleets, and runs generators when the grid fails.
A petrol price hike hits household budgets immediately, but a higher diesel price works its way into the price of food, goods and services over the following months. That is the second-round effect central bankers fear most.
South Africa is particularly badly placed. With only two crude refineries still running, it imports about 60% of its refined fuel and, until the strait closed, more than half of its diesel was shipped through Hormuz.
Wholesale diesel prices are up nearly 73% this year, pushing the benchmark grade to a record high. Transport alone contributed 1.5 percentage points of September’s 4.5% inflation rate. Farmers, miners and hauliers, the economy’s heaviest diesel users, feel it first, and pass on what they can.
Rate hikes cannot ease a diesel shortage, but they can stop a fuel shock from becoming embedded in a wage-price spiral, which is why interest rates are rising despite weak growth. The Bank raised rates by 25 basis points in May, pointing to higher diesel and fertiliser costs, and again in September, warning that inflation will probably rise above 5% around the turn of the year. Core inflation, which strips out food and energy, actually fell to 4% in September, so the Bank is acting early. Its worry is services inflation, still near 5%, which could spread the fuel shock into wages and other prices.
The Fed also hiked rates in September, its first increase since 2023. Stronger-than-expected US core inflation in mid-October led markets to bet on more Fed hikes, pushing up Treasury yields, the benchmark for much of the world’s borrowing. Companies pay those yields plus a risk premium, so debt-funded projects feel the pressure most.
The AI boom’s soft underbelly
For months the AI trade largely ignored the war with Iran. Investors could afford to because the early US build-out was financed from the cash flow of the world’s most profitable companies. Now it relies increasingly on debt.
The most exposed are “neoclouds”, which borrow heavily to buy AI chips and build data centres, then rent out the computing power. A boom funded by cash can afford to be patient; one financed by debt is at the mercy of the bond market. Rising yields bring the war straight to its door.
And that, the Financial Times warns, is where cracks are now showing in America’s $10-trillion AI infrastructure boom. By pushing up interest rates, the energy shock could hasten a reckoning for a build-out behind much US growth.
The bond market sounded a warning in October, when US inflation beat forecasts, reviving rate-hike expectations and sending AI shares lower. The clearest signal came from CoreWeave, the most indebted neocloud. Its bond yields shot up to nearly 16%, and the cost of insuring its debt reached levels S&P Global Market Intelligence associates with distress.
Higher rates hurt twice: they shrink the value of distant earnings and they raise the cost of data centres built on cheap-money assumptions. Many US data centres are already stalled waiting for grid connections, and when power and revenue are uncertain, more expensive credit can turn a delay into a cancellation.
Markets can limit the damage: during the mid-October sell-off, investors fled to the relative safety of longer-dated US government bonds, pulling those yields lower and easing benchmark borrowing costs, even as the premium on riskier AI debt kept rising. A sudden crash looks less likely than a slow grind, as in 2022, when the Nasdaq lost about a third of its value over a year of rising rates. The risk is a repeat if fuel prices keep rates higher for longer.
Diesel alone is unlikely to break the AI boom, but it could keep borrowing costs high for longer than a debt-funded build-out was planned for. Cash-rich giants such as Microsoft, Alphabet, Amazon and Meta can wait; the borrowers cannot.
The signal to watch is whether stress spreads from CoreWeave to Oracle, the most heavily indebted of the big cloud providers. For now, the squeeze is confined to the fringes. If it reaches the core, the AI boom would have a financing problem.
Eight months ago, a tanker voyage costing more than a rocket launch would have sounded far-fetched. Since then, a crude problem has become a diesel problem, and South Africans are paying for it at the till as well as the pump. If it becomes a cost-of-capital problem, an AI slump could send investors fleeing emerging markets, weakening the rand and making dollar-priced diesel dearer still. South Africans would then pay twice: once for scarce diesel and again through a weaker rand and costlier credit.
