Refining margins hit record highs as Iran, Russia disrupt global fuel supplies

Refining margins for gasoline and diesel have soared to multi-year highs in July 2026, driven by Middle East hostilities and disruptions to Russian exports, lifting refiner stocks across the globe and prompting analysts to declare a new era of profitability for the sector.

A Perfect Storm for Margins

U.S. crack spreads hit record levels in July as Iran's threats to block Middle East energy exports through the Strait of Hormuz combined with ongoing drone attacks on Russian refineries to tighten global fuel supplies. Crude oil climbed above $79 per barrel on July 15, with Brent trading near $85, as markets priced in further disruption risk.indexbox+2

Russian western oil exports reached record levels in June — nearly 3 million barrels per day — as damaged domestic refineries forced Moscow to ship crude rather than finished products, effectively removing refined fuel supply from global markets. The structural backdrop in the U.S. is equally supportive: roughly 900,000 barrels per day of refining capacity has been retired since 2023, pushing crack spreads 35-45% above their 2022-2024 averages.energystrat+1

Marathon Petroleum ↗ 0.91% has gained roughly 74.5% year-to-date in 2026, while Valero ↗ 1.53% has surged more than 50%. HF Sinclair ↗ 1.69% has also rallied sharply, with analysts raising its fair value estimate to $87.aaii+2

Indian Refiners Cash In on Export Windfall

India's refiners are on track to export about 1.4 million barrels per day of petroleum products in July — the highest since September and roughly a fifth above year-ago levels — according to Kpler vessel-tracking data cited by Bloomberg. The surge reflects robust margins after the Russian export ban and Middle East hostilities tightened global supplies.energy.economictimes.indiatimes+1

Mangalore Refinery and Petrochemicals approved its Q1 FY27 results on July 15, reporting revenue of ₹41,609 crore and profit after tax of ₹915 crore — a sharp turnaround from losses posted in the year-ago period. Morgan Stanley ↗ 1.73% has previously described a "golden age" for refining and maintains overweight ratings on Indian oil marketing companies including HPCL Hindustan Petroleum Corporation Limited, BPCL Bharat Petroleum Corporation Limited, and Indian Oil Corporation.cnbctv18+3

Asian Refiners Join the Rally

In South Korea, S-Oil has benefited from multiple analyst upgrades. Shinhan Investment Securities raised its target price by 29% to 180,000 won on July 13, citing strong refining margins and easing cost burdens. Shinyoung Securities had previously lifted its target to 140,000 won from 110,000 won in May.biz.chosun+2

Mizuho increased its 2026 U.S. refining crack forecasts by 61% in late May, while Morgan Stanley upgraded Phillips 66 ↘ 0.95% to overweight in April, noting its EBITDA estimates sit roughly 7% above consensus. The breadth of the rally — spanning U.S. independents, Indian state-run refiners, and Asian operators — underscores how geopolitical disruption has reshaped the global refining landscape into one of sustained margin expansion.investing+1