The highly profitable refining industry amid the U.S.-Israel-Iran and Russia-Ukraine wars

Document No.: A614/0663 Publication Date: July 28, 2026 The Highly Profitable Refining Industry Amid the U.S.-Israel-Iran and Russia-Ukraine Wars Disruptions in crude oil supply and comprehensive attacks on Russian refineries have pushed refining crack spreads in Europe and the United States above USD 60 per barrel; refineries are operating at full capacity; India is emerging as the world’s ‘floating refinery’ nation. Wang Nengquan Since its outbreak in February 2022, the war between Russia and Ukraine has now lasted for four years and five months; on February 28, 2026, the war among the United States, Israel, and Iran erupted and remains intermittently active to this day. As the former world’s largest energy exporter, the most critical global hub for oil and gas production and export, and a vital chokepoint for international oil and gas transportation, the Russia-Ukraine and U.S.-Israel-Iran wars have severely disrupted global oil and energy markets. As a pivotal segment of the petroleum value chain, the refining industry has entered an unprecedented boom phase—driven by wartime-induced crude supply disruptions and direct attacks on refineries. India, seizing this opportunity, has transformed itself into the world’s ‘floating refinery’ nation. Record-High Refining Margins and Refinery Utilization Rates The combined impact of the U.S.-Israel-Iran war and the ongoing Russia-Ukraine war on global oil and energy markets is multifaceted. For the refining sector specifically, the cumulative effect since 2026 has been record-high refining profits and elevated refinery utilization rates across major economies such as the United States. Industry expert Tsvetana Paraskova reported on these developments in two articles published on the website OilPrice.com on July 10 and July 23, 2026. (I) Fuel Refining Margins Hit All-Time Highs Amid Tightening Markets During the week of July 10, 2026, gasoline and diesel refining margins surged to new record highs, driven by renewed escalation in Middle Eastern tensions, Russia’s ban on diesel exports, and persistently declining global fuel inventories. Although several million barrels of crude oil have recently successfully transited the Strait of Hormuz, the sharp rise in fuel refining margins—and the widening spread versus crude oil prices—indicates that global fuel markets remain extremely tight. On Wednesday, July 8, 2026, European diesel refining margins soared to a historic high exceeding USD 60 per barrel following Russia’s announcement of a diesel export ban—intended to alleviate domestic fuel shortages triggered by Ukrainian drone strikes on Russian refineries. According to data compiled by Reuters, the premium of European gasoline prices over crude oil reached a four-year high of USD 41 per barrel. The last time European gasoline commanded such a premium over Brent crude was during the summer of 2022—the initial phase of the Russia-Ukraine war. Meanwhile, the NYMEX prompt 3-2-1 crack spread—a key indicator of refiner profitability—hit a record high of USD 64.58 per barrel on July 8. Refining margins continue rising due to export bans and intense competition among refineries to process newly arriving crude from the Middle East. Furthermore, fuel inventories in many countries—including the United States—are at multi-year lows, further boosting refining margins and the spread over crude oil. ‘European crack spreads have breached USD 60 per barrel; Brazil, Africa, and Turkey are scrambling to secure alternative fuel supplies from India, the Middle East, and the U.S. Gulf Coast,’ stated Sparta Commodities.

Value distribution along the crude oil value chain

Soaring oil prices have triggered inflation, which in turn has pushed interest rates higher and tightened liquidity. In such an environment, only one class of asset remains reliably safe: the very source of inflation itself—crude oil and refined products. The crude oil value chain comprises three segments: upstream exploration and production, maritime transportation (oil shipping), and downstream refining and processing. Upstream profit ≈ wellhead price − production cost; its growth is relatively modest. Both shipping and refining profits derive from their respective shares of the crack spread—the margin between refined product prices and crude oil prices. Under peacetime conditions, shipping captures only a small slice of this spread. Today, however, we are witnessing a ‘double whammy’—a sharply expanding crack spread multiplied by a sharply increasing share claimed by shipping. This combination generates maximum volatility and risk—but geopolitical turmoil is precisely where outsized returns originate. So long as the wars persist, shipping capacity will remain chronically impaired. Current freight rate increases rival those seen during Germany’s unrestricted submarine warfare in World War I—yet they have occurred in far less time. Markets and senior policymakers worldwide have severely underestimated the extent of deterioration. I am the first analyst across the entire internet to draw a parallel between German U-boats and Houthi ‘motorboat’ tactics (though some private analysts have voiced similar analogies off-record—deeming them unsuitable for formal reports). Geopolitically, Germany’s reach pales in comparison to that of the two actors controlling critical straits—and they possess, in addition, today’s ultimate game-changer.

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