South Korean refiner S-Oil posted solid second-quarter earnings as the protracted Middle East conflict kept energy prices elevated and refining margins wide, and it expects oil supply to remain tight through the rest of the year.

The outlook from the Saudi Aramco-controlled oil refiner suggests it could continue to benefit from wide crack spreads--the difference between crude oil and refined fuel prices. The results also come as crude oil prices rebounded last month amid renewed tensions in the Middle East, following a June decline after a temporary easing of the Strait of Hormuz blockade.

S-Oil on Monday forecast regional refining margins to stay firm in the third quarter, supported by summer driving-season demand in Asia, increased need for cooling amid extreme heat and export restrictions in some countries.

With global crude and refined-oil inventories significantly depleted by first-half supply disruptions, tight supply-demand conditions are likely to persist, the company said, supporting firm market conditions in the second half.

Global oil supply remains disrupted five months into the Iran war, though President Trump's decision on Sunday to hold off on a new attack on Tehran eased geopolitical tensions temporarily. A round of fighting last week--involving the U.S., Iran, Saudi Arabia and Iran-backed Houthi militants--disrupted two of the world's most critical oil-shipping routes.

Flows through the Strait of Hormuz are still severely constrained, while intensified Houthi attacks on vessels transiting the Bab al-Mandeb Strait have further disrupted oil-tanker traffic.

S-Oil's net profit was 514.58 billion won, equivalent to $356.6 million, for the three months ended June. That missed a FactSet-compiled consensus estimate of 609.02 billion won but marked a strong rebound from a loss a year earlier.

Revenue surged 41% to 11.343 trillion won. Operating profit was 965.02 billion won, also reversing a loss in the previous year.

S-Oil's refining business drove second-quarter earnings. The segment generated operating profit of 532.40 billion won, accounting for more than half of total operating profit.

The company's lubricant segment posted record second-quarter operating profit, also contributing to overall earnings growth.

Oil prices ended July with their largest monthly gain since March, after hostilities between the U.S. and Iran flared again. They slipped Monday morning in Asia after President Trump said new U.S.-Iran talks would begin, easing concerns regarding supply disruptions in the Middle East.

Meanwhile, the Organization of the Petroleum Exporting Countries and its allies pressed ahead with another oil-production increase, saying Sunday that they will raise output by about 188,000 barrels a day in September.

S-Oil shares were about 5% lower in afternoon trading after the results. Still, the stock has climbed more than 40% year to date.