Not all oil giants are prospering from the Iran war

Subscribe to enjoy similar stories.The third gulf war should, in theory, be a huge blessing for big oil. In January most analysts had expected Brent crude, the global oil-price benchmark, to average $60 a barrel in 2026. It ended the first quarter at $118; refined products have risen faster still.

With most Gulf oil trapped behind the Strait of Hormuz, exports from America, Africa and Brazil are up. Western majors should therefore be collecting fatter margins on every barrel—and selling more of them, too.Since the war began the share price of Shell, a British giant, has risen by 4%; those of TotalEnergies, BP and Eni, its big European rivals, have soared by 15–17%. But Chevron and ExxonMobil, America’s twin colossi, are down by 1% and 3%, respectively.

The war’s effect on Western majors, it turns out, is uneven. First-quarter results, released in recent days, point to three reasons: hedging positions, trading gains and the location of production assets.In the three months to March 31st Chevron and Exxon reported net incomes of $2.2bn and $4.2bn—down by 37% and 46%, respectively, from a year before. These sharp declines are largely accounting illusions.

Oil-and-gas sales are typically agreed weeks or months before delivery. To guard against price swings, the majors buy hedges—contracts that pay if oil prices fall in the interim. When prices soar, the hedges lose value, causing paper losses.

These amounted to $2.9bn for Chevron and $3.9bn for Exxon in the quarter.Those markdowns will be offset by higher revenue when the sales are completed. But American rules require firms to recognise hedging losses immediately, not upon delivery. Moreover, American producers typically buy more price protection than European rivals.