Key Takeaways:
US oil majors are on track to report more than $25bn in combined quarterly profits as the Iran war drives the biggest energy supply disruption in decades, setting up a political clash with President Donald Trump over gasoline prices ahead of the midterm elections.
ExxonMobil and Chevron are expected to post second-quarter net income of $15bn and $9.7bn, respectively, later this month — more than triple the prior quarter — as crude prices surged above $100 a barrel and US refining margins hit record levels after Iran largely closed the Strait of Hormuz, according to forecasts compiled by FactSet. Marathon Petroleum and Valero are also poised to report their strongest profits since 2022, when Russia's invasion of Ukraine triggered a global energy crisis.
"The administration is clearly eager for some sort of fuel price relief ahead of the election, but the industry did not cause prices to rise — the war did," said Kevin Book, managing director at ClearView Energy Partners.
The conflict shut in Gulf exports accounting for almost 20% of global demand, sending WTI crude above $110 a barrel in April and pushing the US 3-2-1 crack spread — a key benchmark for refining profitability — to an all-time high, according to LSEG data. US ultra-low sulfur diesel futures surged more than 14% in a single session this week after Russia banned diesel exports following Ukrainian drone strikes on its refineries, deepening a global fuel supply crunch. US distillate stocks fell by nearly 5 million barrels last week, Energy Information Administration data showed.
The profit gusher puts Big Oil on a collision course with Trump, who has accused companies of price gouging and ordered the Department of Justice to investigate. The average US gasoline price stands at $3.80 a gallon, up almost 25% from a year ago, while diesel has risen 30% to $4.80 a gallon, according to AAA. Trump has said gasoline should cost $2.25 a gallon — a level last seen in 2020 during the pandemic demand collapse. An FT poll last week found 58% of voters believed the war had not been worth the cost.
Supply Crunch, Not a Drilling Problem
Despite White House pressure to ramp up drilling, US oil majors have resisted launching costly new rig programs, arguing the profit surge is temporary. US crude production hit a record 13.6 million barrels per day in 2025, but the number of active rigs actually dipped, with gains driven by efficiency improvements rather than new wells, according to the EIA. ExxonMobil and Chevron said in May they did not intend to significantly increase drilling from initial plans.
"The industry is strong, but oil companies are looking at this and saying it's a blip on the radar," said Joe Adamski, managing director at ProcureAbility. Fears of political blowback — including potential windfall profit taxes — are also keeping executives from appearing to capitalize on the conflict, he said.
Refining Bottlenecks Keep Fuel Prices Elevated
Even if crude supplies from the Gulf resume, elevated fuel prices could persist because of limited global refining capacity. "There is this huge disparity between refined product prices and crude prices," said Carl Larry, an analyst at Enverus. "The crux here is that refining capacity is limited, whereas crude production, even in these times, almost seems unlimited."
Russia's diesel export ban adds further pressure. The world's second-largest diesel exporter, Russia supplied Brazil, Turkey and the Middle East after Europe shunned its products following the Ukraine invasion. Tighter global diesel supplies could buoy future profits for US refiners that produce the fuel, which is critical for industry and agriculture.
Crude prices fell back to about $80 a barrel in recent weeks on hopes for a peace deal but rallied sharply after Trump said the ceasefire was "over" and the US launched fresh strikes. Brent crude settled at $78.02 a barrel Wednesday, up 5.2%, while WTI rose 4.4% to $73.52. Shipping through the Strait of Hormuz had recovered to only about a third of pre-war levels before the latest escalation, according to Rystad Energy.
"It's a volatile situation, and with volatility comes a premium on price," said Ed Hirs, an energy fellow at the University of Houston. "Uncertainty costs money."
This article is for informational purposes only and does not constitute investment advice.
