By: Russ Kamp, CEO, Ryan ALM, Inc.
Treasury yields have recently slid down from decade highs, as Fed near-term inaction and instability within the AI trade are encouraging investors to seek the protection of bonds in general and Treasuries more specifically. But I encourage you not to get too complacent. You see, while rates have fallen, inflation worries continue to escalate, and it isn’t just the price of oil measured by the cost of a barrel of Brent or WTI, which are both up, again.
The bigger story remains the refined fuels, such as jet and wholesale diesel. Yes, WTI is about 51% higher than immediately before the war (2/27/26), yet wholesale diesel has nearly doubled (+97%), and jet fuel is up approximately 91%. EIA’s latest daily series has Gulf Coast diesel around $4.96/gallon and Gulf Coast jet fuel at $4.63 versus $2.51 and $2.43, respectively, on February 27.
That divergence is important:
WTI: +51%
Brent: +61%
Jet fuel: +91%
Wholesale diesel: +97%
As many students of the economy know, the price of diesel may be the most economically important factor in the inflation story today because it works its way through almost everything, including; trucking, agriculture, construction, mining, manufacturing, shipping, and ultimately the cost of goods delivered to consumers.
The national retail diesel price is now approximately $6.32/gallon, versus $3.67 when the war began. Brown University’s Iran War Energy Cost Tracker estimates that the higher price of gasoline and diesel has already imposed roughly $140 billion of additional consumer costs, or about $1,069 per U.S. household.
Not surprisingly, Jet fuel creates a parallel inflation impact through airlines and air freight. In addition, it was recently reported that holiday travelers will likely see significant fare increases, with some reporting that an increase of 22% is likely.
There may not be any urgency on the part of the Fed to raise rates in the near-term, but if these prices remain elevated or worse, rise, the inflation story that drove Treasury yields higher will be back on the front page of the WSJ. That isn’t likely good for either equities or bonds!
