US-Iran Hormuz deal may cool refinery boom

May 26, 2026, 08:20 am

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The Makran region (center), located along the Gulf of Oman, southern Iran and southwestern Pakistan, the Strait of Hormuz (left), and the northern coast of Oman./AFP-Yonhap

Expectations are growing that soaring global oil prices and refining margins could quickly stabilize as the United States and Iran move closer to an agreement to reopen the Strait of Hormuz. The prospect has raised concerns that the strong earnings enjoyed by South Korean refiners in the first half of the year may prove short-lived.

According to major foreign media reports on May 25, Washington and Tehran are preparing to sign a memorandum of understanding that includes a 60-day ceasefire and the full reopening of the Strait of Hormuz to pre-war traffic levels within 30 days.

If roughly 1,000 vessels currently waiting to pass through the strait resume normal operations by June, bottlenecks in global crude supply are expected to ease, potentially driving oil prices sharply lower in the second half of the year.

Earlier, market analysts had predicted that prolonged tensions in the Middle East would deepen a global crude shortage, as supply available to the market fell far short of demand. With supply disruptions pushing international oil prices to around $100 per barrel, many forecasts expected prices to remain elevated throughout the second half.

Such expectations fueled optimism for record earnings among South Korea’s refiners. Some brokerages projected that SK Innovation, backed by overseas natural gas production assets, could post operating profit of 5.39 trillion won this year, up from 448.7 billion won a year earlier.

S-Oil, which has maintained full refinery utilization, was also forecast to generate operating profit of 3.21 trillion won, compared with 235.6 billion won last year. Expectations had been widespread that all four major refiners — including GS Caltex and HD Hyundai Oilbank — would continue posting strong results through the second half on the back of high crude prices.

However, if the Strait of Hormuz reopens in June, the outlook could change dramatically. As crude supply constraints ease and oil prices stabilize, refining margins are likely to weaken. More critically, inventory valuation gains that boosted earnings during the high-price environment in the first half could turn into large inventory losses if oil prices decline later this year.

As a result, expectations for listed refiners such as SK Innovation and S-Oil — which had benefited from market bets on prolonged supply shortages — may cool rapidly, potentially slowing earnings momentum and corporate value re-rating.

Experts say the timing of the Strait of Hormuz normalization will be critical in determining the direction of the global energy market in the second half.

Jang Tae-hoon, associate research fellow at the Korea Energy Economics Institute, said, “If the Strait of Hormuz reopens within June, the fundamental supply-demand imbalance will be resolved and oil prices are likely to stabilize quickly.”

“However, if the situation continues into August and inventory shortages emerge, panic buying could surge not only from consumers but also from governments seeking to secure strategic reserves, potentially keeping oil prices elevated through the end of the year,” he added.

#Hormuz Strait #US-Iran talks #oil prices #refining margins #SK Innovation