U.S./Israel-Iran War: the Middle East On Edge
NextFin News - The war in Iran did not just disrupt oil flows; it minted fortunes for the commodity traders who bet on the disruption. Mercuria Energy Group's profit jumped 122% in the nine months to June, while Gunvor Group's profit rose 644% in the six months to June, according to company financials. Two of the world's largest independent trading houses have turned the biggest energy-security shock in decades into their most profitable stretch since the early months of the Russia-Ukraine war.
The contrast with a year earlier is the point. Gunvor's net profit for the first half of 2025 was $120.8 million, down 71% from $417 million, as oil oversupply and thin margins squeezed the industry. Mercuria's 2025 full-year profit was $1.31 billion, a 37% decline, achieved while paying just $1 million in tax. In 2026, the same companies are printing money. The question is not whether war pays traders; it is whether the war premium is a cyclical spike that will revert, or the first leg of a structurally higher-margin era for the industry.
The Mechanism: Why War Is a Trading House's Best Customer
Commodity traders do not own the resource; they own the option on chaos. Their profit is the spread between a price in one place and a price in another, and that spread widens only when the market breaks. The Iran war broke the market in three ways at once.
First, the physical flow broke. Shipping traffic through the Strait of Hormuz, which normally carries about a fifth of global seaborne oil, virtually ground to a halt after the conflict began in late February 2026. Traders were forced to re-route cargoes, charter tonnage at premium rates, and hold inventory longer. The Baltic Dirty Tanker Index more than doubled in weeks, reaching above 3,700 points in late March before easing toward 1,850 by July. Every extra day a tanker sits at anchor is a day someone earns freight, storage, and a wider physical premium.
Second, the price signal broke. Brent crude surged 63% in March, the biggest monthly gain since 1988, and closed at $118.35 a barrel on March 31. It traded as high as $119.50 during the month and, through the spring, repeatedly refused to fall below $100. Vitol CEO Russell Hardy said in late April that the oil market would lose at least one billion barrels of crude and refined products because of the war, even if the conflict ended, and that 600 million to 700 million barrels were already gone. When a tenth of the world's seaborne oil can vanish behind a chokepoint, the backwardation steepens, inventories gain value, and the traders who hold them gain with it.
Third, the forecasting consensus broke. A poll of 38 economists and analysts on March 31 raised the 2026 Brent average forecast to $82.85 a barrel, about 30% above the $63.85 forecast polled in February before the war began. Analysts described it as the largest forecast increase in the poll's records. Stratas Advisors' John Paisie warned that if the Strait remained closed another month with no resolution, Brent would move toward $190. In that environment, a trader with risk controls and balance-sheet capacity is not guessing direction; it is harvesting dispersion.
The mechanics of that harvesting are straightforward and brutal. A steep backwardation - where prompt oil trades far above oil for delivery months later - rewards anyone who holds physical barrels and sells them forward. A disrupted chokepoint widens the gap between grades, between locations, and between time periods. Traders with storage, tankers, and credit can buy the cheap grade, move it to the expensive market, and lock in the spread with a futures hedge. The war did not require them to predict the price level. It required them to predict that the market would stay broken, and to have the balance sheet to keep buying while everyone else waited.
"The beginning of 2026 has been marked by historic market disruption, and Gunvor's trading and shipping teams have been well placed to help supply global markets, delivering secure and affordable energy to clients around the world," Gunvor Chairman and CEO Gary Pedersen said in the company's results statement. "Given the nature of the extreme volatility prevalent these days, Gunvor has upheld tight risk controls."
Pedersen had already flagged the setup months earlier. In the FY2025 statement, he said "constructive volatility picked up" in November and December 2025 and that "in Q1, the company has already achieved its gross profit of the previous year." Gunvor's full-year 2025 gross profit was $1.63 billion. In other words, the first three months of 2026 alone generated roughly what the entire prior year did.
The Baseline Matters: These Profits Are a Snapback, Not Just a Boom
The 644% and 122% figures read like a regime change. They are also, in part, a base-effect story. Gunvor's H1 2025 profit of $120.8 million was a trough, not a normal year. The industry had spent 2024 and most of 2025 in margin compression: oil oversupply, OPEC+ output returning, fewer open arbitrage routes, and competition from the same traders who had over-expanded after the 2022 windfall.
Gunvor's own FY2025 numbers show how deep the trough was. Net income collapsed to $104 million, down about 85%, including $462 million of writedowns and impairments booked by the new management team in the fourth quarter. Adjusted net income was $567 million. Revenue was $144 billion on 253 million metric tons. The new ownership, led by CEO Gary Pedersen after founder Torbjörn Törnqvist sold his 86.1% stake to about 60 employees in December 2025, cleared the decks before the storm hit.
That timing is not incidental. A management buyout that books exceptional losses in the fourth quarter and then rides a war-driven volatility spike into the first quarter is the cleanest possible setup for a headline profit surge. It does not make the profits less real; it makes the percentage change a misleading guide to the structural story.
Mercuria tells a related but distinct tale. Its first-half 2026 profit rose 88% to $1.09 billion, one of its strongest first halves on record, according to the June report. The nine-month-to-June figure of 122% includes that first-half surge plus a strong third quarter as the Hormuz crisis deepened. Mercuria's edge has been diversification: it has moved beyond oil into metals, LNG, and power, and it closed $3.84 billion in multi-currency revolving credit facilities on June 30, 2026, to fund larger positions.
There is also a transparency angle that cuts against the traders. Mercuria does not report its results publicly; the figures come from company financials reviewed externally. Its 2025 profit of $1.31 billion came with an effective tax rate of 0.08%, or $1 million. When war produces private windfalls at near-zero public contribution, the political question lags the market question by only a few election cycles. Traders know this. It is one reason the biggest houses are now racing to rebrand themselves as energy-security infrastructure rather than speculative middlemen.
The industry-wide pattern matters as much as the individual results. The two companies are not outliers; they are the visible data points in a sector-wide windfall. Vitol, Trafigura, and the trading arms of the oil majors have all reported stronger conditions as the Hormuz disruption forced a reshuffling of global flows. When the largest private traders in the market all post double- or triple-digit profit growth in the same window, the driver is not skill rotation. It is the market itself paying a premium for the function of moving molecules through a broken system.
Second-Order Effect: The War Premium Is Already Priced; the Normalization Risk Is Not
The first-order read is obvious: war raises volatility, volatility raises trading margins, margins raise profits. The market has priced that conclusion. What the market has not priced is the asymmetry of the unwind.
When Brent was at $118 and the Strait was closed, the entire commodity complex priced in a prolonged disruption. Forward curves carried a large risk premium, and traders' books were positioned for sustained dispersion. If the Strait reopens and flows normalize quickly, that premium evaporates faster than it built. Realized volatility compresses, backwardation flattens, inventory values fall, and the same positions that printed money start to mark down. The profit surge is convex to disorder; the profit decline is convex to order.
There is also a second-order credit channel that most observers miss. Trading houses run on letters of credit and revolving facilities that let them finance cargoes many times larger than their own balance sheets. Gunvor's Singapore arm closed a $1.366 billion sustainability-linked revolving credit facility in June 2026, upsized from an initial $800 million and oversubscribed by more than 71% with 32 banks. Mercuria closed $3.84 billion of multi-currency facilities days later. Banks are happy to lend into volatility when collateral values are rising. They are less happy when the collateral is a cargo of oil bought at $115 that is now worth $85. The financing that amplifies the boom becomes the transmission belt for the bust.
This is the cyclical verdict: the war-driven profit spike is mean-reverting. It will revert on its own once flows normalize, and the reversion can be sharp because it travels through leverage.
The Structural Counter-Case: This Time, the Floor Is Higher
The strongest argument against a full reversion is that the industry that entered 2026 is not the industry that entered 2022. Traders have diversified into metals, LNG, and power; they have built data and analytics capabilities that consultants have credited with prolonging record profits; and they operate in a world where sanctions and export controls have made fragmentation a permanent feature rather than a crisis exception.
Gunvor is explicitly pivoting along these lines. Through June and July 2026 it pushed into power and gas rather than oil, signing a 12-year electricity supply agreement with Firmus Technologies in South Australia, a linked battery-storage offtake, and a deal to feed 600 megawatts to data-centre campuses. Mercuria has expanded into metals trading, betting that structural changes in global energy systems will prove lucrative. If trading margins are now supported by energy-transition metals, LNG arbitrage, and sanctioned-flow dislocations, the post-war floor sits above the pre-2022 floor.
This structural case is credible but incomplete. Diversification lowers the variance of earnings; it does not eliminate the dependence on volatility. A metals trader in a calm market still earns thin spreads. LNG arbitrage narrows when global gas inventories are full. Sanctioned-flow dislocations require someone to keep buying the discounted barrels, and that buyer's risk appetite is itself cyclical. The structural shift raises the floor; the cyclical war premium still dominates the ceiling. The honest call is a hybrid: a cyclical spike riding on top of a structurally higher base.
What Would Prove the Cyclical Call Wrong
The cyclical verdict fails if, after the Strait of Hormuz reopens and Brent settles, traders' gross margins hold at or above their 2025-2026 levels for four consecutive quarters. Specifically: if 30-day Brent realized volatility stays below 15% and Hormuz throughput returns to pre-war levels for a full quarter, yet Gunvor and Mercuria still report gross-profit margins above roughly 1% of turnover, the "war bonanza" was not a cyclical spike. It was a step-change in franchise value.
Until that signal prints, the base case is reversion. The war created the opportunity; it will not sustain it.
Outlook: Who Benefits, Who Is Exposed, and What to Watch
In the short term, the beneficiaries are the traders with balance-sheet capacity and the banks willing to fund them. Gunvor's oversubscribed facility and Mercuria's $3.84 billion credit lines are the tell: capital is flowing to the houses that can warehouse risk. The exposed are the refiners and consumers who bought forward into the spike and are now marked to a lower curve, and the banks whose collateral values fall with oil.
Medium term, the base case is a grind back toward normalized margins as Hormuz flows recover and the risk premium drains out of the curve. The upside case is a protracted closure or a wider regional escalation that keeps Brent above $100 and volatility elevated into 2027. The downside case is a rapid de-escalation that compresses volatility below pre-war levels and triggers margin compression worse than 2025, because the industry now carries more leverage and more inventory bought at war prices.
Long term, the structural floor argument decides the terminal valuation of the trading houses. If fragmentation, sanctions, and energy-transition metals keep spreads wide, the 2026 profits are a new normal. If not, 2026 will be remembered as the year traders made a full year's profit in a single quarter and gave most of it back.
Watch three signals: Hormuz throughput volumes, 30-day Brent realized volatility, and quarterly gross-profit disclosures from the traders themselves. The first two tell you when the war premium has left the market. The third tells you whether the industry has finally outgrown its dependence on it.
The war bonanza is real, but it is a rental, not an inheritance. The traders who treat it as the latter will be the ones funding the next cycle's losses.
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