Iran hands Witkoff three conditions to reopen Hormuz; diesel futures are down 11% in a week, pump prices are not

Iran's foreign minister, Abbas Araqchi, gave U.S. special envoy Steve Witkoff Tehran's conditions for reopening the Strait of Hormuz at a meeting on the sidelines of the UN General Assembly on Tuesday, according to Iranian state media as reported by Reuters. There are three: an immediate lifting of the U.S. naval blockade, the immediate release of frozen Iranian assets, and an end to the war on all "resistance" fronts.

President Trump struck a hopeful tone. He told reporters the two sides were "moving toward a settlement," The Jerusalem Post reported, while also repeating that the U.S. "can't let them have a nuclear weapon." Earlier in the day a senior Iranian official told Japan's Kyodo News that the strait could reopen within seven days if Washington took steps toward ending the blockade, OilPrice.com reported. We covered that offer in this morning's oil story.

Why the list matters more than the meeting

The seven-day offer was what moved oil this morning. The list handed over this afternoon is what a deal would actually have to satisfy, and it is wide. The blockade is something Washington can lift on its own. The asset demand and the "all resistance fronts" demand reach well beyond the strait itself. None of that has to kill a deal, but it does mean the conditions go well past a simple trade of shipping access for sanctions relief.

The market has already priced in a good deal of hope. Brent futures ended Tuesday near $98.52 a barrel, down about 1.8% on the day and about 9.4% below the $108.75 close on September 15.

The number behind the number: diesel

For businesses the fuel that matters is diesel, and here the wholesale and retail markets are telling two different stories.

In the week wholesale diesel fell almost 58 cents, the EIA's national pump average rose another 24 cents to a record $6.529. A year ago it was $3.749. The gap between the futures price and the pump is now about $1.84 a gallon, up from about $1.02 a week earlier. Retail prices usually lag the wholesale market, and in the past week that gap widened by about 82 cents.

That gap is where the relief will show up, if it comes. As an illustration only: a truck running 2,000 miles a week at 6.5 miles a gallon burns about 308 gallons. If pump prices eventually gave back the 57.6 cents that wholesale has already lost, that truck's fuel bill would fall by about $177 a week. Pump prices do not have to follow, and they will not if the talks break down. The point is that the relief is sitting in the wholesale market and has not yet reached the people buying fuel.

Who it hits

• Fleets on fuel surcharges. Surcharge tables are commonly pegged to the weekly EIA retail average, and that number is still rising. Shippers are likely to keep paying record surcharges until the retail average turns, even though wholesale already has.
• Farms at harvest and contractors buying bulk. Buyers who can price loads off the rack or futures rather than the retail posting are the first to see the drop. We broke down the costs by trade in what record diesel means for truckers, landscapers and farms.
• Oil traders. A price that has fallen about 9% on hope is exposed if the talks stall on the asset or "all fronts" conditions. The emergency reserve is not much of a cushion either: the EIA puts the Strategic Petroleum Reserve at 284.96 million barrels as of September 11, down from 405.73 million a year earlier.

Next up: the EIA's weekly petroleum report on Wednesday and Thursday's jobless claims. See the crude oil chart and the markets board.

Sources: Reuters via The Standard; The Jerusalem Post; OilPrice.com; U.S. Energy Information Administration weekly retail diesel and SPR data; ICE and NYMEX futures closes. The fuel-bill example is an illustration, not a forecast. This is market information, not investment advice.