The world's biggest oil companies delivered a turbulent set of first-quarter earnings, as the war in Iran and the closure of the Strait of Hormuz distorted both profits and physical flows, creating clear winners and losers.
Back
4 oil majors post mixed Q1 results as Iran war hits profits
The divergent first-quarter fortunes of the world's biggest oil companies underscore the deep distortions caused by the war in Iran, as firms with strong trading arms like Shell and BP capitalized on volatility that caught rivals ExxonMobil and Chevron flat-footed.
According to a recent report from Hartford Funds, the energy sector has historically beaten inflation 74 percent of the time, delivering real returns of 12.9 percent. "Energy companies are closely tied to energy prices, which are a major part of inflation indexes," the report said. "When inflation rises, those companies have generally benefited as well." This quarter's results, however, reveal a more complex picture where geopolitical savvy and trading prowess have become critical differentiators.
While Shell and BP beat expectations on the back of strong trading and higher prices, ExxonMobil and Chevron reported headline profit declines. The US-based majors blamed "paper losses" from hedging mismatches, highlighting their relative lack of preparedness for the scale of the disruption. The turmoil has led analysts to re-evaluate the sector, with Truist recently raising its price recommendation on midstream operator Enterprise Products Partners L.P. (NYSE:EPD) to $40 from $36, citing spread optimization that drove stronger-than-expected Q1 results.
The ongoing conflict is expected to maintain high volatility in crude oil prices, impacting global inflation forecasts and creating a challenging environment for the broader market. The divergent results could trigger a significant rotation of capital within the energy sector, favoring companies with robust, adaptable trading operations over those more exposed to pure production metrics.
A Tale of Two Quarters
The first-quarter earnings laid bare two distinct strategies. European majors Shell and BP, with their vast and sophisticated trading desks, were able to navigate the chaotic market, leveraging price swings and rerouted product flows to their advantage. Their results stand in stark contrast to their American counterparts, Exxon and Chevron, whose earnings were hit by their inability to hedge effectively against the sudden closure of the Strait of Hormuz. This performance gap highlights a long-standing debate within the industry about the role and risk of large, in-house trading divisions. In this instance, the traders clearly won.
Inflation Hedge Under Pressure
Energy stocks are a traditional haven for investors seeking to hedge against inflation, but this quarter's mixed results are testing that thesis. While the underlying commodity prices are high, the ability to translate that into profit is now heavily influenced by a company's ability to manage geopolitical risk and market volatility. The performance of natural gas distributors like Atmos Energy Corporation (NYSE:ATO), which saw Citi raise its price recommendation to $191, further illustrates that downstream and midstream operations are finding favor for their relative insulation from upstream chaos. The key takeaway for investors is that in a world beset by conflict, not all energy stocks are created equal.
This article is for informational purposes only and does not constitute investment advice.
[1] Oil majors post mixed Q1 as Iran war distorts profits, product flows[2] Ardmore Shipping Q1 earnings call highlights[3] Granite Ridge targets $345M-$385M 2026 capital while raising LOE guidance to $7.75-$8.75 per BOE[4] AHRI Data Shows Heat Pumps Drove Growth in March 2026[5] 10 Best Inflation-Hedge Stocks to Buy for 2026
