The war in Iran is putting pressure on the refineries, fuel prices could stay high for a long time.

The ongoing conflict in Iran has significantly disrupted global refining operations, potentially leading to prolonged high fuel prices, according to a Reuters analysis. The war has placed immense pressure on the world’s refining industry, with diesel and gasoline prices remaining elevated for years, experts warn. While crude oil markets have adjusted relatively well to the sharp decline in Middle Eastern production, refineries face far greater challenges in restoring lost capacity. This imbalance is evident in the growing gap between crude oil prices and refined products, as highlighted by the report. Crude oil prices currently stand around $90 per barrel, approximately 25 percent higher than at the start of the conflict, though still below the peak of $118 during wartime conditions. However, fuel prices have surged even more sharply. European diesel prices have risen over 70 percent since the beginning of the war, while U.S. gasoline prices have climbed nearly 60 percent. The war has forced more than a fifth of refining capacity on the Middle East to shut down, with the closure of the Strait of Hormuz further limiting fuel exports. At the same time, Ukrainian attacks on Russian energy infrastructure have reduced Russia's refining output by almost 30 percent, bringing daily processing capacity down to less than four million barrels. In July, Moscow banned the export of diesel due to supply shortages. These developments have had immediate effects on refinery margins, which have reached record levels in Europe, Asia, and the United States. In Europe, the spread between diesel prices and crude oil costs has more than tripled since March, reaching over $75 per barrel. U.S. diesel margins have increased by over 140 percent and hit a record high of $100 per barrel on Monday. According to the International Energy Agency (IEA), global refining capacity in the second quarter was 5.1 million barrels per day lower than a year earlier. Demand for refined products fell by four million barrels per day, yet this was insufficient to offset the drop in supply. As a result, the market continues to face a shortfall of more than one million barrels per day, with further deterioration expected in the third quarter. Meanwhile, fuel stockpiles are rapidly declining, exacerbating the shortage. Global oil inventories have fallen by 3.5 million barrels per day since March, equivalent to more than three percent of worldwide consumption. It is expected that these stocks will continue to decrease until the end of the year. U.S. data shows that diesel reserves are at their lowest level for this time of year in the past three decades, while gasoline inventories are at their lowest seasonal level since 2012. Even potential diplomatic agreements between Washington and Tehran or the reopening of the Strait of Hormuz may not quickly reduce fuel prices. Over 20 refineries in Persian Gulf countries have been damaged during the war, and repairs could take time due to long lead times for essential equipment. These factors increase the risk that high energy prices will persist as a source of inflationary pressure. Evidence of this can already be seen in inflation data, as rising energy costs have begun to affect consumers, while depleted stockpiles and reduced refining capacity continue to strain the industry. The pressure on the energy market could become a longer-term issue for the global economy, particularly for Europe and Asia, where fuel prices have risen alongside the cost of liquefied natural gas.