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Refining Stocks Rally as US-Iran Strategy Shift Sends Cracks Higher, TPH Says

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US refining equities surged 15.9% last week as the US shifted its Iran strategy, driving fuel cracks higher and raising expectations for sustained refining strength, TPH Energy Research said in a Monday note.

The US moved toward an economic blockade of Iran and away from military strikes, prompting a sharp response across refining markets as investors assessed the potential impact on fuel supplies.

TPH said Iran's 47 years of economic sanctions make it difficult to see the latest US strategy reopening the Strait of Hormuz in the near term, leaving refining markets exposed to continued uncertainty.

US gasoline cracks rose $3 to $38 per barrel, reaching a new five-year high, while diesel cracks climbed $11 to $80b/bbl, also marking a five-year high.

The rally extended across US regions, with the Midwest and Southwest leading weekly gains. European gasoline cracks increased $6 and diesel cracks rose $11, while Asian gasoline and diesel cracks gained $2 and $3, respectively.

Futures curves also strengthened, with 2027 gasoline cracks increasing $1 and 2027 diesel cracks rising $5.

The 2027 diesel curve has climbed to $47/bbl from $18/bbl at the start of the year, indicating that a significant portion of this year's gains could carry into 2027, TPH said.

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