Shell and BP Post Record Profits as Iran War Drives Oil Refining Margins to Historic Highs

What’s happening

Shell nearly doubled quarterly profit to $10.8 billion year-on-year as refining margins soared to record levels, while BP's third-quarter earnings nearly quadrupled to $8.5 billion. Both oil majors benefited from geopolitical disruptions in the Middle East, which have widened the spread between crude input costs and refined product prices. Shell hiked its share buyback program to $5 billion, signaling confidence in sustained margin expansion.

Market impact

Energy stocks have rallied on the earnings beats, with refining capacity constraints and supply disruptions supporting margins that typically compress during demand slowdowns. The windfall profits are attracting climate activist scrutiny and political pressure, particularly as Trump has criticized Big Oil for making "too much money." Investors are pricing in sustained elevated energy prices through 2025, supporting integrated oil majors' valuations.

Broader implications

The Iran war has become a structural support for oil and refining profitability, with geopolitical risk premiums now baked into energy markets. This creates a perverse incentive for conflict continuation and raises questions about energy security and inflation persistence in developed economies. Housing costs, transportation, and manufacturing are all pressured by elevated energy prices, complicating the Fed's inflation-fighting efforts.