Japan's Big Three Oil Refiners Soar on Strait of Hormuz Blockade

Japan's three major oil refiners, ENEOS Holdings, Idemitsu Kosan, and Cosmo Energy Holdings, posted record profits in the first quarter of fiscal 2026. The combined net profit reached ¥716.5 billion (approximately $4.5 billion), exceeding the previous record by approximately 50%. This is a significant increase from the April-June quarter of 2022.

The primary factor contributing to this surge was the blockade of the Strait of Hormuz, triggered by escalating Middle East tensions. The time lag between crude oil procurement and sales allowed profit margins to expand as oil prices rose during that interval. Additionally, inventory valuation gains on petroleum stockpiles held by each company swelled substantially.

Idemitsu Kosan demonstrated the most pronounced growth among the three, with its net profit surging eightfold year-on-year to ¥217.5 billion (approximately $1.4 billion). Revenue rose 24% to ¥2.27 trillion (approximately $14.4 billion). Operating profit swung to a surplus of ¥307.4 billion (approximately $1.9 billion), a dramatic turnaround from the ¥4 billion (approximately $25.3 million) loss recorded in the same period a year earlier.

However, each company remains cautious about the outlook, anticipating declining crude oil prices that would reverse the time-lag effect and significantly weigh on earnings. This 'time-lag profit and loss' structure is an accounting characteristic unique to oil refiners, where rising price environments generate massive inventory valuation gains, while declining price environments impose heavy valuation losses.