What Caused the Record Highs?

Four primary factors converged to create the July 2026 record:

Strait of Hormuz Disruption (US-Iran Conflict): The breakdown of a US-Iran ceasefire and renewed hostilities severely restricted shipping through the Strait of Hormuz, cutting an estimated 3.3 million barrels per day in refined product exports from the Persian Gulf . Although the strait partially reopened by late June, lingering supply-chain kinks persisted .

Russia's Diesel Export Ban: Russia announced a ban on diesel exports, which sent European diesel refining margins above $60/barrel — a record high .

Ukrainian Drone Strikes on Russian Refineries: Continuing attacks on Russian refining capacity halted diesel, gasoline, and jet fuel exports and even forced Russia to become a net importer of some products — a supply swing of roughly 1.5 million bpd .

Structural Capacity Tightness: About 1 million bpd of global refinery capacity had been permanently closed since 2023, leaving the system with no spare capacity to absorb the shocks .

How Refiners Benefited by Region

United States

U.S. independent refiners are enjoying some of their best profit margins in years .

• The prompt Nymex 3-2-1 crack spread hit an all-time record of $64.58/barrel on July 8 .
• Gasoline crack spreads averaged about $25/barrel in Q2 2026, up ~$16 from the prior quarter .
• Diesel crack spreads averaged about $45/barrel in Q2 — the strongest level ever recorded for that period .
• Major refiners Marathon Petroleum (MPC), Phillips 66 (PSX), and Valero (VLO) each rose an average of 6% in a single week in July, outperforming crude and the broader energy sector .
• The windfall, however, is considered unlikely to last as supply chains gradually rebalance and political pressure over pump prices mounts .

Asia (Broadly)

Asian refining margins also rocketed to their highest levels since 2022, driven by the Hormuz supply disruption and subsequent crude shortages that forced regional refineries to cut runs .

• Singapore complex refining margins surged sharply in March 2026 and remained elevated through July .
• Asian diesel margins rose markedly, contributing to high regional profitability .
• China ramped up refined fuel exports to their highest in 16 months, using its spare capacity and unutilized export quotas to capture the elevated margins .

India

India's refiners have benefited from the same global dynamics, but the picture is mixed:

• State-run refiners (IOC, BPCL, HPCL): Reported a 457% year-on-year surge in combined profits (₹17,882 crore) for an earlier quarter, boosted by strong refining margins . Their combined profits for a recent period reached ₹77,821 crore, though analysts caution this represents only a 3–4% margin on turnover .
• Reliance Industries (owner of the world's largest refinery at Jamnagar) saw its shares rally ~3% as investors turned optimistic about rising diesel crack spreads . However, Reliance's consolidated net profit was forecast to decline 3.7% year-on-year for the March quarter due to crude price pressures on other businesses .
• Nayara Energy raised gasoline and gasoil prices in March 2026 to recover financial losses from retail sales, indicating that not all Indian refiners captured the full upside — domestic retail price caps continued to squeeze margins on local sales .
• India also imposed a windfall profit tax on diesel exports and local supplies, partially clawing back the windfall for state revenue .

Key Metrics at a Glance

Bottom line: The July 2026 record crack spreads were driven by a triple supply shock — Hormuz disruptions, Russia's diesel export ban, and Ukrainian strikes on Russian refineries — layered atop long-term capacity closures. U.S. refiners captured the most visible windfall, while Asian and Indian refiners also posted strong gains, though Indian state refiners faced partial offset from domestic price controls and windfall taxes.

What Caused the Record Highs?

Four primary factors converged to create the July 2026 record:

Strait of Hormuz Disruption (US-Iran Conflict): The breakdown of a US-Iran ceasefire and renewed hostilities severely restricted shipping through the Strait of Hormuz, cutting an estimated 3.3 million barrels per day in refined product exports from the Persian Gulf . Although the strait partially reopened by late June, lingering supply-chain kinks persisted .

Russia's Diesel Export Ban: Russia announced a ban on diesel exports, which sent European diesel refining margins above $60/barrel — a record high .

Ukrainian Drone Strikes on Russian Refineries: Continuing attacks on Russian refining capacity halted diesel, gasoline, and jet fuel exports and even forced Russia to become a net importer of some products — a supply swing of roughly 1.5 million bpd .

Structural Capacity Tightness: About 1 million bpd of global refinery capacity had been permanently closed since 2023, leaving the system with no spare capacity to absorb the shocks .

How Refiners Benefited by Region

United States

U.S. independent refiners are enjoying some of their best profit margins in years .

• The prompt Nymex 3-2-1 crack spread hit an all-time record of $64.58/barrel on July 8 .
• Gasoline crack spreads averaged about $25/barrel in Q2 2026, up ~$16 from the prior quarter .
• Diesel crack spreads averaged about $45/barrel in Q2 — the strongest level ever recorded for that period .
• Major refiners Marathon Petroleum (MPC), Phillips 66 (PSX), and Valero (VLO) each rose an average of 6% in a single week in July, outperforming crude and the broader energy sector .
• The windfall, however, is considered unlikely to last as supply chains gradually rebalance and political pressure over pump prices mounts .

Asia (Broadly)

Asian refining margins also rocketed to their highest levels since 2022, driven by the Hormuz supply disruption and subsequent crude shortages that forced regional refineries to cut runs .

• Singapore complex refining margins surged sharply in March 2026 and remained elevated through July .
• Asian diesel margins rose markedly, contributing to high regional profitability .
• China ramped up refined fuel exports to their highest in 16 months, using its spare capacity and unutilized export quotas to capture the elevated margins .

India

India's refiners have benefited from the same global dynamics, but the picture is mixed:

• State-run refiners (IOC, BPCL, HPCL): Reported a 457% year-on-year surge in combined profits (₹17,882 crore) for an earlier quarter, boosted by strong refining margins . Their combined profits for a recent period reached ₹77,821 crore, though analysts caution this represents only a 3–4% margin on turnover .
• Reliance Industries (owner of the world's largest refinery at Jamnagar) saw its shares rally ~3% as investors turned optimistic about rising diesel crack spreads . However, Reliance's consolidated net profit was forecast to decline 3.7% year-on-year for the March quarter due to crude price pressures on other businesses .
• Nayara Energy raised gasoline and gasoil prices in March 2026 to recover financial losses from retail sales, indicating that not all Indian refiners captured the full upside — domestic retail price caps continued to squeeze margins on local sales .
• India also imposed a windfall profit tax on diesel exports and local supplies, partially clawing back the windfall for state revenue .

Key Metrics at a Glance

Bottom line: The July 2026 record crack spreads were driven by a triple supply shock — Hormuz disruptions, Russia's diesel export ban, and Ukrainian strikes on Russian refineries — layered atop long-term capacity closures. U.S. refiners captured the most visible windfall, while Asian and Indian refiners also posted strong gains, though Indian state refiners faced partial offset from domestic price controls and windfall taxes.