Global refined fuel prices are rising once again, squeezed by the combined pressures of renewed fighting between the United States and Iran in the Strait of Hormuz and Ukraine’s escalating campaign of long-range attacks on Russian oil refineries.

If the Trump administration hopes to lower gasoline and other refined product prices ahead of the November congressional elections, it will need to make faster progress toward reopening the Strait of Hormuz or find ways to moderate Ukraine’s strikes on Russian refining infrastructure.

Consumer and business fuel prices reflect the base cost of crude oil, plus refining margins for converting crude into usable products, wholesale and retail distribution costs, and applicable taxes. Until recently, crude prices had fallen sharply on expectations of a ceasefire that would restore normal tanker traffic through the Strait. Front-month U.S. crude futures averaged around $70 per barrel in July, well below the wartime peak of $99 seen in April and May.

However, declining crude prices have been partially offset by widening refining margins. As Ukraine intensified its attacks on Russian facilities, the gross refining margin for turning three barrels of U.S. crude into two barrels of gasoline and one barrel of diesel has climbed to a near-record $61 per barrel in July, up from $53 in May and $47 in April.

So far in July, a weighted basket of refined product futures has traded around $130 per barrel – lower than the May high of $151 but still far above pre-war levels of $80-90. In recent days, both crude prices and crack spreads have begun rising simultaneously as conflicts in the Gulf and Russia intensify, pointing to even sharper increases in retail fuel prices.

Russia’s petroleum refineries represented nearly 7% of global refining capacity and 6% of crude processed in 2025. Since mid-2025, Ukraine has conducted increasingly sophisticated and far-reaching strikes on these facilities to weaken Russia’s war effort and improve its negotiating position.

“The range of Ukrainian drones and missiles has tripled, bringing more Russian refineries into range. Attacks have shifted from easier targets like tank farms to critical secondary processing units that are far harder to repair. Drawing on lessons from World War II bombing campaigns, Ukraine has employed “double tap” strikes on facilities already under repair to complicate reconstruction efforts,” notes energy analyst John Kemp.

There was a temporary lull in attacks between January and March 2026, coinciding with U.S. and Israeli operations against Iran. Since April, however, the campaign has accelerated to record levels, creating severe fuel supply issues in Russia and prompting export bans on diesel.

Russia’s Soviet-era refineries are configured primarily for diesel and gasoil production. The country was previously the world’s second-largest exporter of these fuels after the United States. The loss of Russian refining capacity and exports is now tightening global fuel markets. Refineries elsewhere are shifting output toward diesel, reducing yields of gasoline and jet fuel.

Any escalation in the Gulf that damages additional refining capacity in Iran or Arabian states could exacerbate the shortfall. Even before the latest intensification, U.S. gasoline and diesel prices were already elevated in real terms.

The Trump administration now faces difficult trade-offs in managing conflicts in both theaters while minimizing the impact on American motorists and the broader economy.

As John Kemp observes in his analysis: “The oil market is facing war on two fronts, in Russia and the Gulf, further straining fuel supplies at a time when they have already been depleted, and putting upward pressure on fuel prices and margins.”

The coming weeks will test whether diplomatic or military efforts can ease these dual pressures before higher fuel costs become a significant political and economic burden.

/JKempEnergy/