Exxon, Chevron Q2 profits surge as Hormuz crisis lifts oil prices

Exxon Mobil and Chevron reported second-quarter profits that more than doubled and tripled, respectively, as the Strait of Hormuz disruption lifted oil prices, though a rare earnings miss sent Exxon's stock down 2 percent.

"ExxonMobil has a bigger global refining footprint than rival Chevron, and much of the windfall from that side of the business was already priced in," said Arun Jayaram, an analyst at J.P. Morgan.

Exxon reported adjusted earnings of $3.52 a share on sales of $104.7 billion, missing consensus estimates of $3.56 on $110 billion, according to FactSet. Chevron earned an adjusted $6.06 a share on sales of $70 billion, beating expectations of $5.55 on $62.7 billion. In the year-ago quarter, Exxon earned $1.64 a share on $81.5 billion in revenue, while Chevron reported $1.77 a share on $44.8 billion.

The results carry outsized weight for the energy ETF market: Exxon and Chevron together account for a substantial share of holdings in major energy funds, making their earnings a primary driver of sector-wide flows. With U.S. retail gasoline averaging $4.11 a gallon and diesel $5.35, the question is whether the Hormuz disruption persists long enough to sustain these profit levels into the third quarter.

Hormuz Disruption Reshapes Supply Routes

The U.S.-Israel war with Iran has severely disrupted oil flows from the Middle East, with about a fifth of the world's crude and crude products transiting through the Strait of Hormuz in peacetime. Brent crude, the international benchmark, has been particularly exposed to the disruption, while oil-exporting countries have found increasingly creative and costly alternative routes. Chevron has explored investing in a pipeline connecting Iraq's oil fields to the Syrian coast.

"Workarounds have helped establish some degree of flow through the strait, but they are short-term actions," Chevron CEO Mike Wirth said on the earnings call. The pipeline would be a medium-term move, he added.

Exxon CEO Darren Woods described the near-standstill at Hormuz as creating "continued inhibition for movement," noting that even once the strait reopens, it will take time for shippers to regain confidence. "It's too critical to the overall health of the world economy and for people to meet their standards of living to have that disrupted for perpetuity," he said.

Debt Reduction and Cost Discipline

Both companies used their windfalls conservatively, reducing debt by more than $8 billion at Chevron and more than $7 billion at Exxon. Justin Jenkins, an analyst at RBC Capital Markets, said Exxon's profits continued to improve on "relentless" cost efficiencies, allowing the company to keep its "fortress" balance sheet.

The earnings miss was rare for Exxon, which last disappointed adjusted per-share expectations in April 2024. Friday's 2 percent drop was on track to be the worst post-earnings decline for the stock since Jan. 31, 2025.

U.S. energy companies have added rigs six times in the past seven weeks, according to Baker Hughes data, suggesting producers are responding to higher prices. Exxon's joint venture in Guyana has also recovered its initial investment costs, setting up the company for increased profits from that oilfield.

For energy ETFs, the supermajor results serve as the sector's primary driver. With Exxon generating roughly $160 million per day in profit last quarter, the combined weight of these two companies in major energy funds means their earnings trajectory directly shapes investor flows into the sector. The divergence between Exxon's miss and Chevron's beat could also prompt fund managers to reassess their relative weightings within energy portfolios.

The forward outlook hinges on Hormuz. If the disruption persists, oil prices and supermajor profits could stay elevated, supporting energy ETF valuations. If the strait reopens quickly, refining margins and downstream profits could compress, leaving Chevron's upstream-heavy portfolio better positioned than Exxon's.

This article is for informational purposes only and does not constitute investment advice.