Hormuz closure fuels record refining profits as airlines scramble for jet fuel

The months-long closure of the Strait of Hormuz has carved roughly 5 million barrels per day out of global refining output, sent margins to record highs, and left airlines scrambling for jet fuel — a cascade of disruptions that the International Monetary Fund says amounts to a "large global economic shock."

A Supply Chain Under Siege

The U.S.-Israeli military campaign against Iran, which began in late February, effectively shuttered the strait through which about 20 percent of the world's oil once flowed. The disruption has now lasted more than five months, compounded by a three-week closure of the Bab el-Mandeb Strait to Saudi tankers. IMF Managing Director Kristalina Georgieva warned that 13 percent of global oil and 20 percent of gas flows remain stuck, with effects expected to linger well into 2027. In July, the IMF cut its 2026 global growth forecast to 3 percent, citing the war's "lingering effects".oilprice+4

U.S. retail gasoline prices reflect the strain. The national average stood at about $4.02 per gallon as of August 8, according to AAA — roughly a dollar above year-ago levels. The Bureau of Transportation Statistics recorded a May average of $4.48 per gallon, with the West Coast reaching $5.59.ycharts+2

Refining's Windfall

The scarcity has handed Western refiners enormous pricing power. Global refinery runs fell to around 78 million barrels per day in the second quarter — the lowest since the depths of the COVID-19 pandemic — while U.S. refineries operated at 97 percent of capacity in late July, well above their long-term average of 90 percent.international.astroawani

BP's ↘ 1.42% refining-indicator margin climbed to $30 per barrel in the second quarter and has averaged $42 so far in the third quarter. Exxon Mobil ↘ 1.16% posted downstream profits of $5.5 billion, its best since 2022, while Chevron's ↘ 1.41% downstream earnings reached $4.9 billion, a decade high. Shell ↘ 1.23% ran its refining network at 102 percent utilization.international.astroawani

Airlines Feel the Squeeze

Europe faces a jet fuel supply deficit of nearly 600,000 barrels per day in the third quarter, according to Energy Aspects, with inventories covering just 30 days of demand. Ryanair ↘ 0.59% reported an 11 percent rise in operating costs from unhedged fuel exposure, while in the United States, Southwest Airlines ↗ 0.23% shipped fuel from Texas to California via the Panama Canal to keep planes flying. United Airlines ↗ 0.34% expects nearly $6 billion in additional fuel expense for full-year 2026 compared to its forecast at the start of the year.oilprice

U.S. imports of Saudi crude have meanwhile fallen to zero for the first time in decades, a shift that prompted economist Steve Hanke to declare: "Goodbye petrodollar". With the U.S. Strategic Petroleum Reserve at 304.8 million barrels — just above the 300-million-barrel threshold economists consider critical — the margin for further disruption is thin.wanaen