War-driven fuel crunch sends refining profits soaring for global oil giants

The conflict involving Iran has reshaped global energy markets, creating a severe shortage of refined fuels that has pushed refining margins to record highs and delivered windfall profits for the world's largest oil companies. 

According to an analysis by OilPrice.com, disruptions to crude flows through the Strait of Hormuz, combined with reduced refining activity and export restrictions, have tightened supplies of gasoline, diesel and jet fuel more than crude oil itself.

The result has been the strongest refining environment since Russia's invasion of Ukraine in 2022, with major energy companies reporting their highest quarterly earnings in years and warning that market conditions are likely to remain favourable in the months ahead.

Refined fuel markets tighten faster than crude

While crude oil prices have remained volatile, refining margins have continued to climb, highlighting a widening imbalance between crude supplies and refined petroleum products.

Disruptions linked to the Iran conflict have slowed oil shipments through the Strait of Hormuz, reducing refinery throughput across Asia. At the same time, China's temporary restrictions on fuel exports and Russia's diesel export ban have further constrained global supplies.

As a result, inventories of gasoline, diesel and jet fuel have fallen, sending refining margins to historic highs even as crude prices briefly exceeded $100 per barrel.

The International Energy Agency (IEA) has also warned that refined product markets are significantly tighter than crude markets.

"There is no room for complacency on oil security amid the escalation in hostilities and a continued drawdown of available commercial inventories," IEA Executive Director Fatih Birol said last month.

While noting that IEA member countries still hold more than one billion barrels of emergency oil stocks, Birol added that refinery output has failed to keep pace with crude deliveries.

Big oil reaps windfall earnings

The exceptionally strong refining environment translated into robust financial results for the world's largest integrated energy companies.

Shell more than doubled its second-quarter earnings compared with a year earlier as higher oil prices, record refinery utilisation and strong trading performance boosted profits beyond analysts' expectations.

The company's global indicative refining margin rose from $17 per barrel in the first quarter to $24 in the second quarter, while refinery utilisation reached 102%.

"The operational performance of Refining has been excellent," Shell Chief Executive Wael Sawan said during the company's earnings call.

French energy major TotalEnergies also reported a sharp increase in profits, with adjusted net income rising 68% year-on-year to $6 billion.

Its European refining margin marker climbed to $12.4 per barrel, nearly three times higher than during the first half of 2025.

"Refining and Chemicals performed in an exceptional way, leveraging market conditions, managing well the tensions on supply of refined products to maximise captured margins," Chief Executive Patrick Pouyanné said.

U.S. oil giants ExxonMobil and Chevron likewise posted their strongest earnings in years, reflecting both higher crude prices and exceptionally profitable refining operations.

Supply constraints expected to persist

Industry executives believe refining margins are likely to remain elevated as global fuel inventories remain low and supply disruptions continue.

Chevron Chief Executive Mike Wirth described middle distillates—particularly diesel—as the tightest segment of the market.

"Middle distillates are really the tight spot right now. Initially, it looked like jet, now diesel," Wirth said, citing Russia's diesel export ban, refinery outages and continuing constraints in the Strait of Hormuz.

He added that product prices could continue rising through the third quarter and possibly beyond.

ExxonMobil Chief Executive Darren Woods similarly said the company expects a "very robust refining market with very high margins."

Even if disruptions in the Middle East ease later this year, global fuel inventories remain low enough that refiners could continue benefiting from elevated margins for several more quarters as countries rebuild depleted stocks.

By Sabina Mammadli