ULSD diesel at $4.2822/gal has re-rallied to the top of its post-crisis range, +102.5% YTD, after Iran confirmed on August 11 that the Strait of Hormuz will remain shut. Renewed tanker attacks, a new Bab el-Mandeb blockade threat on Saudi exports, and Iran's reparations demands have reversed the June truce's premium unwind — Brent reached $105/bbl on July 23 and EIA now assumes Hormuz flows stay severely constrained through August. Physical tightness reinforces the geopolitical premium: distillate stocks fell 3.5 million barrels to 107.2 million (12% below the 5-year average), exports hit a record 1.884 million b/d, and refineries are maxed at 96.5% utilization with the diesel crack at ~$88/bbl. The forward curve is in steep backwardation ($18.96/bbl Sep-Dec), pricing scarcity now with normalization only by 2027. The procurement call: LOCK NOW with layered hedges through Q4 — the upside tail of a closure into winter heating season is asymmetric against a curve that already prices $3.10 by Aug-27.
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