Gasoline refining margins in Northwest Europe have slipped from a near four-year peak reached earlier this month, as traders reassess the impact of ongoing Houthi militant attacks on commercial vessels in the Red Sea. The so-called ‘crack spread’ — the difference between crude oil prices and wholesale gasoline — has narrowed by roughly 8% over the past week, though it remains significantly above historical averages for July.
The London Stock Exchange saw a subdued session on Monday, with the FTSE 100 closing 0.3% lower at 8,214 points. Energy giants BP and Shell each fell around 1.2%, tracking the drop in Brent crude, which slipped below $82 a barrel. Mid-cap oil services companies also lost ground, reflecting market caution over whether the blockade disruption has been fully priced in.
The Houthi campaign, which began in late 2023, has forced tankers to reroute around the Cape of Good Hope, adding up to two weeks to voyage times and squeezing refinery capacity in Europe. The UK’s reliance on imported diesel and petrol means any sustained rise in global margins quickly feeds into pump prices. Data from the RAC shows the average cost of a litre of unleaded in the UK stands at 148.3p, down slightly from 151p in early July but still well above the 140p level seen at the start of the year.
“The easing in margins is a welcome but fragile development,” said Laura Chen, an energy analyst at London-based consultancy Stonehaven Economics. “The Houthis have shown no sign of stopping their attacks, and any fresh escalation could send margins spiking again. For UK pension funds with exposure to energy equities, the sector remains a source of both yield and risk.”
Investors are now watching for signs that the disruption is easing. The UK’s benchmark equity index has been supported this year by its heavy weighting in oil and mining stocks, but the broader economic picture remains clouded by sticky inflation. The Bank of England’s next interest rate decision is due in early August, and persistent fuel costs could complicate the path to lower borrowing costs.