Iran would probably have to curtail products exports and turn to the import markets if its refineries are attacked, write Ieva Paldaviciute and Nader Itayim
Key oil and gas production and export facilities have stayed out of the firing line a week into the conflict between Tehran and Tel Aviv, bringing a degree of relief to global markets. But the targeting of downstream assets by both sides has raised the spectre of looming domestic fuel shortages if the conflict endures.
No Iranian crude refineries have been hit yet in the Israeli strikes that, for the most part, have focused on key military and nuclear-related infrastructure and personnel. But strikes on two gas processing facilities in the south of the country and two products storage facilities on the outskirts of Tehran suggest refineries, or condensate splitters, soon could be affected.
Iran retaliated by attacking Israel's 197,000 b/d Haifa refinery on 15 June, damaging is power supply system. The plant initially continued crude processing while shutting some secondary units, but it fully halted operations on 17 June.
Iran has nearly 2mn b/d of crude refining capacity spread across nine facilities, which rises to about 2.4mn b/d when including the 360,000 b/d Persian Gulf Star condensate splitter in Bandar Abbas, on the Mideast Gulf coast. This is up from below 1.9mn b/d a decade ago, after capacity additions at the 58,000 b/d Shiraz, 630,000 b/d Abadan and 220,000 b/d Tehran refineries, among others.
Iran nevertheless has grappled with a severe products imbalance in recent years, driven primarily by a fast increase in its domestic fuel consumption. Although operations at all refineries remain unimpeded, the conflict has triggered a frenzy of fuel buying by Iranians, particularly in Tehran, with Israel warning residents to leave the city as it intensifies its bombing campaign.
If any refining infrastructure is hit, Iran may quickly have to halt products exports to ensure that domestic supply can be met. Iran is a net exporter of fuel oil and naphtha, but its position as a gasoline and gasoil exporter has diminished in recent years owing to its fast-growing domestic demand. The reimposition of US sanctions on Iran by US president Donald Trump during his first term in 2018 and his "maximum pressure" campaign on Tehran at the start of his second term in January have only added pressure to its products trade.
Iranian naphtha is shipped mainly to the UAE, where it is used as a gasoline blendstock. Iran exported about 116,000 b/d of naphtha in January-May, data from consultancy FGE show, down by 12pc from its 2024 exports.
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Iranian fuel oil typically makes its way to floating storage hubs in Asia-Pacific, often after multiple ship-to-ship transfers designed to obscure its origin. Some cargoes are then re-exported to China and bought by independent refiners as feedstock fuel. Fuel oil exports stood at 252,000 b/d in the first five months of this year, down from 264,000 b/d last year.
Iran has had to turn to imports to bridge the gap between its gasoline production of about 660,000 b/d and average consumption of 780,000 b/d during the Iranian year to 20 March 2025, according to state-owned refiner NIORDC. Iran's diesel production has also been playing catch-up, with heavily subsidised consumption exacerbated by fuel smuggling to neighbouring countries. Iran still exported 42,000 b/d of diesel this year, according to FGE, but this is less than half of the 102,000 b/d it exported last year.
The Haifa refinery is a key supplier to Israel's domestic market but it also exported about 12,000 b/d of diesel and gasoil, and 13,000 b/d of fuel oil in January-May, mostly to neighbouring countries in the Mediterranean. A prolonged shutdown could result in Israel turning to products imports, pressuring supply chains in the Mediterranean. Israel aims to restart the plant within weeks.
