Petrobras nearly doubles profits as Iran war pushes oil above $100

Petrobras's near-doubled profit in a single quarter, turbocharged by the war in Iran and Brent crude above $100, dominates Brazil's economic landscape this week — yet the wealth generated by the state-controlled oil giant coexists with a country where 82% of families are in debt and banks are signaling a credit squeeze. This is the central contradiction defining Brazil's moment.

Petrobras, whose ADRs trade on the NYSE, posted net income of R$52.44 billion in the second quarter of 2026, up 96.8% year-on-year and its best nominal result since the second quarter of 2022, when the war in Ukraine drove oil prices higher. This time, the trigger is the conflict with Iran, which began in February and pushed Brent to a quarterly average of $104.52, a 54.1% annual jump. Sales revenue reached R$169.53 billion, growth of 42.3%, while adjusted EBITDA advanced 79.6% to R$93.84 billion. The board approved R$17.4 billion in shareholder remuneration, to be paid in two installments in November and December. The magnitude of the result, according to Valor Econômico, also reflects higher production volumes, though it was partially offset by heavier tax expenses, particularly the oil export tax.

The impasse in the Strait of Hormuz, which has frustrated expectations of a reopening, continued to pressure oil prices in Thursday's session, contributing to the dollar's advance abroad and to declines in U.S. equities, where disappointing tech-sector earnings soured the mood further. In Brazil, the Ibovespa closed down 1.23% at 175,546 points, weighed down by banks, retailers and Vale, while the dollar closed 0.48% higher at R$5.105. The move comes after Copom cut the Selic by 25 basis points to 14% per year, the fourth consecutive reduction — but deliberately avoided signaling next steps. In the view of economists interviewed by Folha de S.Paulo, the central bank preferred to preserve flexibility, leaving open both further cuts and a potential pause in the cycle. Even at 14%, Brazil retains the top spot in the global ranking of real interest rates net of inflation, which sustains the appeal of floating-rate fixed income for domestic investors.

Copom's ambiguity plays out on equally hazy fiscal terrain. Finance Minister Dario Durigan asserted that the Lula government has "zeroed out the deficit," but primary results tell a different story, as noted by both Folha and Valor Econômico, which contrasted the minister's statements with official central bank statistics. The debate is compounded by the fact that interest expenses on the public debt have reached R$1.2 trillion in accumulated terms, generating a political dispute over who bears responsibility for the indebtedness. Lula's government platform for a potential fourth term, approved on Tuesday, reaffirms a commitment to fiscal responsibility and rules out reversing privatizations or introducing zero-fare public transit — signals calibrated for financial markets in an election year — but Durigan also ruled out any discussion of unlinking the minimum wage or imposing capital controls.

Stress in private credit deepens the picture. The share of indebted families set a new record in July, reaching 82%, according to the Confederação Nacional do Comércio — the sixth record in twelve months in a series that began in 2010. Private banks are signaling tighter lending for the rest of 2026, combining higher-than-expected rates with elevated income commitments. Magazine Luiza reported a net loss of R$72.5 million in the second quarter, more than triple the loss of a year earlier, with e-commerce down 11.9% and financial results 15.5% worse. Bradesco, by contrast, delivered R$7.1 billion in profit, its tenth consecutive quarter of growth, with an ROE of 16.2%, focusing on collateralized portfolios; the bank also said it is hedged against El Niño impacts in the agricultural insurance segment. Itaú posted R$12.4 billion in profit and an ROE of 24.3%, though it revised down its guidance for services and insurance revenues — a move that, according to buyside analysts, had already been telegraphed in prior meetings with the market.

On the external front, Brazilian exports to the United States fell 5% in July, the first full month under the 25% tariffs imposed by Donald Trump. Year-to-date through July, the decline reaches 12.2%. Even so, July's trade surplus totaled $7.1 billion — 1% above the same month in 2025 — sustained by higher oil prices, which lifted export revenues even with lower volumes. Year-to-date, the trade surplus stands at $49 billion, 31.2% above the same period in 2025, according to Valor Econômico. In the auto sector, China's Chery group announced a target of selling 500,000 cars per year in Brazil starting in 2031, with a local factory on the verge of being announced — a sign that the Chinese advance in Brazil's auto industry is shifting from imports to local production.

Airlines have accumulated R$5.2 billion in extra fuel costs since the start of the war in Iran, pressured by the 1.9% jet fuel price hike announced by Petrobras. CSN is seeking at least R$15 billion for the full sale of its cement unit, with four bids expected. And one sign of the state of Brazilian companies in the external debt market: Alloha Fibra issued its first international bond of $350 million at a yield of 12.25%, exclusively for refinancing — an elevated cost that reflects the premium demanded by investors after a string of debt restructurings involving Ambipar, Raízen and Braskem.

For Friday's session, the U.S. July payrolls print will be the main external driver — consensus projects the creation of 83,000 jobs, and a print above expectations would reinforce the higher-for-longer thesis in the U.S., with direct impact on Brazilian FX and rate futures. Domestically, earnings season remains intense, with Banco do Brasil scheduled for the 12th; the bank's shares have already shed more than 3% amid uncertainty over the numbers and the impasse with BRB — in which Banco do Brasil requested a waiver of the conciliation hearing at the STF while the Finance Ministry expressed "deep dissatisfaction" with the Federal District's accusations that the federal government has been passive. Vale, meanwhile, was notified by the ANM to pay or contest R$17.7 billion in mineral royalties within ten days — a potential liability that may escalate in the courts and represents a new risk for the stock.

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**Petrobras (NYSE: PBR)** — The state-controlled company posted net income of R$52.44 billion in the second quarter of 2026, up 96.8% year-on-year, driven by an average Brent price of $104.52, a direct reflection of the conflict in Iran; the result is the best since the second quarter of 2022. The board approved R$17.4 billion in shareholder remuneration, equivalent to R$1.34814262 per share, to be paid in November and December.

**Vale (NYSE: VALE)** — The miner was notified by the Agência Nacional de Mineração to pay or contest within ten days debts of R$17.7 billion in royalties for the extraction of mineral resources; the company says the amounts are unfounded. If no measure is taken, the ANM may register the debt as federal active debt and turn to the courts.

**Ternium (NYSE: TX)** — The Italian-Argentine steelmaker that controls Usiminas with 71% of the capital reported EBITDA of $717 million in the second quarter, up 78% year-on-year and 15% above analyst consensus, driven by strong volumes and prices in Mexico and lower-than-expected raw material costs. Net income more than doubled year-on-year to $465 million.