Oil majors set for bumper quarter as Iran war squeezes global supplies

Newyork,UPDATED: Jul 31, 2026 11:46 IST

Analysts expect major oil companies to report strong profits for the spring quarter after the Iran-US conflict disrupted petroleum shipments and pushed up fuel prices worldwide. The fighting, now in its sixth month, has halted most shipping through the Strait of Hormuz, which earlier carried about a fifth of the world’s oil and natural gas supplies.

With supplies under pressure, Brent crude rose from about USD 70 to above USD 100 a barrel for much of March, April and May, and at one point touched USD 126. Exxon Mobil and Chevron are due to announce their second-quarter earnings on Friday, and the money earned between April and June is likely to face close attention as consumers paid more for petrol, diesel and jet fuel and some countries faced shortages.

Higher fuel costs during the period raised expenses for motorists and airline passengers, while low supplies led to sporadic fuel rationing in Australia and the closure of government offices in Nepal and Sri Lanka. According to Global Witness, six of Europe’s largest oil companies posted combined first-quarter profits of USD 22 billion, up 43 per cent from a year earlier.

"There are constituencies around the world who are having a very good crisis, and the oil producers are one of them," said Patrick Galey, fossil fuels lead at Global Witness. "When you compare that to the hundreds of millions of people who are struggling with rolling blackouts, with electricity curbs, rationing, waiting in line for food queues, or the disruption to fertilisers and the potential impact that that has on food prices, we don’t think that it’s a justifiable price for the rest of the world to be paying."

In the US, Democrats in Congress introduced bills in March to tax major oil producers on profits recorded from 2026 onwards and redistribute the proceeds to consumers. Energy companies such as Exxon and Chevron do not set the price of US oil, which moved from USD 68 to USD 115 a barrel during the quarter, as prices are shaped by supply, demand and what buyers are willing to pay.

Senator Sheldon Whitehouse, who introduced the Senate version of the proposal, said, "It’s fair to put a windfall profits tax on inordinate windfall profits rather than cut off children’s food programmes." His bill and a companion measure introduced by Representative Ro Khanna would amend the US tax code to impose a per-barrel excise tax on companies that produced or imported at least 300,000 barrels of oil per day in 2025. The tax would be 50 per cent of the difference between the oil price at the time of the levy and the average price per barrel last year. Similar proposals have failed in earlier years.

Whitehouse also pointed to the effect on households. "We cracked USD 4 again per gallon last weekend in gas stations that I drove by, and that’s a big expense, particularly for families that get their income from driving around from job to job in the work van or the work truck," he said. "It makes a real difference." The average price of a gallon of regular petrol, which was below USD 3 before the US and Israel launched attacks on Iran, reached USD 4.10 this week, about USD 1 higher than at the same point last year.

Analysts said integrated companies such as Exxon and Chevron, which produce oil and gas and also own refineries, are especially well placed in the current market. Tom Seng, assistant professor of energy finance at Texas Christian University, said refineries are benefiting from unusually high "crack spreads", or the profit they expect from turning crude oil into fuels such as petrol, diesel and jet fuel.

Seng said that in late July, refineries buying a barrel of oil for about USD 80 were looking at potential profits of USD 50 to USD 60, far above the usual USD 20 to USD 25 range. "The return on refining, on a percentage basis, has skyrocketed," he said. "Oil right now is priced what it is priced because of the Iran war. But in the meantime, the refineries are making money hand over fist."

Timothy Fitzgerald, a University of Tennessee professor of business economics who studies the petroleum industry, said not all refineries worldwide have been able to secure the crude they need since the conflict began. That has helped refiners with enough supply, including those in the US, to make strong profits, especially on jet fuel and diesel. Diesel in the US is priced about 41 per cent higher than before the Strait of Hormuz was blocked. "If you’re a company that owns a bunch of refinery capacity, things look pretty good," Fitzgerald said.

US refineries are operating near full capacity and are also benefiting because some refineries in the Middle East and Russia were damaged, while others in Asia are no longer getting as much oil from the Middle East as before. Fitzgerald said, "Ultimately, users of the energy services pay. Consumers, people like you and me buying retail motor gasoline or diesel fuel or aeroplane tickets. But it also means that almost everything else we buy has an embedded energy content to it ... and this is where you start to worry about it driving increases in costs."

Fitzgerald said the current situation has created both winners and losers in the industry. "If you’re a company like a US producer, even a US-based international company like an Exxon or Chevron who’s got lots of production outside the Gulf, things are good. You’re selling your product at a higher price," he said. But companies in the Middle East that cannot fully benefit from higher prices because they are struggling to move liquefied natural gas out of the Gulf, or are dealing with damaged oilfields or processing facilities, face a different situation. "Your ability to sell anything and the volume that you may be getting out is so curtailed that your revenues are way down and you’re incurring higher transportation costs and security costs," Fitzgerald said.

Seng said Exxon and Chevron were not as profitable in the first quarter because of the way oil is traded, and April was the first real chance they had to benefit from higher prices. He added that companies with large volumes of oil stored in floating tankers and ready for spot-market sales, including some European firms, were better placed to gain from the price spike in March. Overall, analysts expect the second-quarter results to show how sharply the conflict-driven rise in oil prices lifted earnings for some major producers and refiners even as consumers worldwide paid more for fuel and faced supply disruptions.

With PTI Inputs

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