Aftermath: Oil Execs Thrill to Higher Profits From War

This story was first featured in the Aftermath newsletter, a series from David Dayen exploring the economic consequences of the war in Iran. To have these stories delivered to your in-box as soon as they are published, sign up for the newsletter here.

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Today on Aftermath, we look at the stalemate the war has settled into and whether there’s any way out. Plus, how oil companies are gaining a windfall while so much of their product is stuck in the Strait of Hormuz.

Are We Still at War?

I mean, it feels like the answer is: Yes, forever? I know that Donald Trump has said that the war is actually over in order to avoid Congress having to approve further military action. But he has also now settled on a permanent blockade to squeeze the Iranians into surrender, and naval blockades are acts of war. It’s mass collective punishment the likes of which we’ve seen in Gaza and Cuba.

Though Trump has said this is “more effective than bombing,” it’s unlikely to work.

In the abstract, it’s not too difficult to think up a bargain that both America and Iran might accept to reopen the Strait of Hormuz. The U.S. would like it open, and Iran would like American sanctions to be removed, for instance.

A basic requirement for any bargain, however, is a baseline of trust. And it’s hard to imagine a less trustworthy person than Donald Trump. Hence the latest acronym on Wall Street: NACHO, or Not a Chance Hormuz Opens.

Just consider some history. Trump’s business career in real estate and casinos eventually foundered in part because he compulsively stiffed contractors and refused to pay for things he had ordered. When NBC producers came in to set up The Apprentice, they had to bring in outside vendors to build a set in Trump Tower because he had been blackballed by every local company. Once bitten, twice shy, as the saying goes.

Or consider Trump’s recent behavior toward America’s closest allies since 1945. Trump spent most of a year repeatedly threatening to seize Greenland and/or Canada by force, to the extent that Germany, France, and Denmark stationed soldiers in Nuuk with orders to blow up the runways if American forces attacked.

If Trump is willing to threaten a war of aggression to get a big hunk of ice the American military already had access to, or conquer perhaps the friendliest ally any nation has ever had—baldly violating multiple signed treaties in the process—then any rational observer can’t help but conclude that any agreement Trump signs isn’t worth the paper it is printed on. He’ll stab you in the back for any reason or no reason.

All this is before looking at what Trump has done to Iran to specifically earn their distrust. During his first term, he tore up the Iran nuclear deal, which took years to negotiate, without justification, and assassinated several top Iranian officials. This year, Trump started this war with a Pearl Harbor–style sneak attack and triple-tap strike on a girls’ elementary school. Even when he is discussing peace, he keeps bringing up the possibility of more bombings “just for fun.”

Even if Trump could be rationally convinced to cut an honest deal with Iran, which is hard to imagine, there is every chance he would violate it out of nowhere the next time he experienced some setback and needed to hurt someone to feel better about himself.

That’s probably why Iran is reportedly looking for shipping alternatives to the Strait of Hormuz. Smuggling oil and other goods across the border into Pakistan is apparently increasing fast in both directions. This has happened in peaceful times, but only on modest scales, because it is vastly less efficient than sea transport. But trucks or even mule trains are better than nothing, particularly given how badly the Iranian economy is doing. Iran will need whatever it can get to tide itself over until someone other than Trump is in the White House. Because all indications are that is what it will take to get the strait open for good. —Ryan Cooper

Oil!

It’s one hell of a good time to be in oil, though earnings calls for the two biggest oil companies in the country suggest otherwise. Profits at Chevron and ExxonMobil both dropped during the first three months of 2026, executives reported on Friday. Chevron’s net profit was $2.2 billion, a 37 percent drop from the year before. ExxonMobil’s dropped 46 percent to $4.2 billion. (Though the numbers were lower, they beat Wall Street’s expectations.)

The problem, they said, was that Trump’s war on Iran caused oil prices to rise before that oil was actually delivered, which in turn caused their financial derivative trades to drop in value. (Financial derivative traders, which thrive on volatility, love the sound of that: Energy trader Vitol took home a cool $2 billion in the first quarter.)

But analysts on Friday said that oil industry fortunes would reverse in short order; they estimated that Chevron’s profits would more than triple in the second quarter and that the full year’s profit would increase by 56 percent over last year. They expect ExxonMobil’s profit to double for the period and for the company to end the year with 46 percent higher profits.

As ExxonMobil CEO Darren Woods said during his company’s call, “this is just timing, and it will work itself out, because this is all driven by the requirements to book the paper without booking the corresponding physical barrels that are moving.” The performance shows the “disconnect” between what gets written down in the ledger and the transaction itself.

“We book one half of the deal, not the other half. When the physicals get delivered and you actually bring those into your earnings, it will offset the paper and therefore you’ll get the realized margin,” Woods told the audience.

BP has already booked in the profit, the company said in its first-quarter earnings call. The company drew $3.2 billion for the period, double its take for the same quarter last year. PetroChina also announced a profitable first quarter of ¥43.33 billion, a 1.9 percent increase that converts to about $7 billion. Calls for Shell, Petrobras, and Saudi Aramco, the world’s largest oil company, are later this month.

HOW IS IT POSSIBLE FOR OIL COMPANIES to enjoy a boom when the Strait of Hormuz is closed, the U.S. is blockading its ports, and the world is in general trading disarray? Economists who study the sector say it is a basic Economics 101 equation: Trump’s illegal war has taken about 10 to 12 percent of oil out of the market. But oil companies have approximately doubled the price per barrel. (Gas station owners factor that cost into the prices they charge at the pump, which are at their highest level since Trump started his war, along with the costs of refining, taxes, labor, transportation, marketing, and competition.)

“So you don’t quite sell as much oil anymore as an oil company, but on every barrel you’re making twice the money,” said Gregor Semieniuk, associate professor of public policy and economics at the University of Massachusetts Amherst.

By mid-April, the biggest 100 oil and gas companies had drawn more than $30 million in “unearned profit” during the first month of Trump’s war, according to an analysis Global Witness conducted of Rystad Energy data for The Guardian. If the average cost of a barrel of oil remained at $100, Global Witness said that group would pocket $234 billion by the end of the year. By the middle of last week, the average cost had risen to $106.88.

The biggest winner would be Saudi Aramco, the largest oil company in the world with a market cap of more than $1.5 trillion. Analysts estimated its “war profit” would come to $25.5 billion. Coming in second and third would be Kuwait Petroleum Corp. and ExxonMobil, the analysis found.

Not every oil company is having the best quarter of their lives, Semieniuk said, especially smaller state oil companies in the Middle East. But because American and European oil majors are the ones left standing, they’re the ones supplying everyone else. “They’re not seeing missiles flying, they’re actually benefiting from this. They didn’t have any increases in their costs, but suddenly the prices are through the roof, they’re making a killing, similar to in 2022,” Semieniuk said, referring to when U.S. gas cost an average of $5.02 a gallon, a record high caused by Russia’s war on Ukraine. Semieniuk added that while companies’ property may have been damaged in West Asia, any losses will be more than made up by their profits from the cost of oil.

WHY ARE OIL COMPANIES ALLOWED to profiteer off a war? After all, they didn’t do anything to deserve the windfall, like invent some new way of drilling for oil. The answer, Semieniuk said, is that, like other commodities, oil is sold and bought on global markets and when there’s a dearth of supply, the markets work like old textbooks say they’re supposed to.

“They are benefiting because this is how commodity markets work,” Semieniuk said. “There’s no reason why they have to work this way, and it’s a clear case of ‘Can’t we do better than this?’”

Oil and gas executives said the best way to help companies through this difficult time is by deregulating their industry. Chevron CEO Mike Wirth called on governments to relax rules and never undertake price caps, taxes on profits, or bans on exports, because those send the wrong “signal” and “distort the normal behavior of the market.”

But the government could instead prioritize workers rather than company profits, and help them manage the crushingly expensive oil. Some options Semieniuk listed included subsidizing oil and gas purchases, taxing the excess profit the companies make, or coordinating with other governments to create a “buyers club,” an idea he and German economist Isabella M. Weber described in a Project Syndicate essay last month.

Trump’s illegal war is remaking the world, said economist Richard Wolff, visiting professor in the Graduate Program in International Affairs at the New School and co-founder of Democracy at Work. Though no one knows exactly when, the world will soon exhaust its strategic reserves and inventory of oil and Trump will do something he’s trying to avoid.

“He’s going to have to admit to the world what we already know,” Wolff said, “which is that the United States made a colossal mistake in this war and has already been defeated.”

Once those reserves run out—or even get close to running out—the price of oil will go crazy. The affordability crisis will be even harder to bear.

“It is unspeakable. Whatever the word ‘democracy’ means, this is the opposite of that,” Wolff said of how oil and gas companies are making billions while the rest of us struggle to buy the gas they sell so we can drive to work and make 12 percent less than we did in 2019.

“The public should be screaming bloody murder,” Wolff said. “They have every right to be angry … nothing about these higher prices reflects anything about productivity, or availability of oil, or the great transition we’re supposed to be in out of fossil fuels.”

But Wolff also described a scenario that none of the executives have yet raised in their earnings calls. It illustrates why the United Arab Emirates withdrew last week from the Organization of the Petroleum Exporting Countries (OPEC), whose de facto head, Saudi Arabia, limits how much oil can come onto the market. Saudi Arabia does that to keep prices high. The UAE has a lot of oil and wants to sell it. What if their play is to sell all their oil right now, while the prices are sky-high, because they want to make as much money as they can before the world has to leave fossil fuel behind?

Iran will eventually reopen the Strait of Hormuz. Oil shipments will resume. But what if nobody wants it anymore? Despite George W. Bush and Donald Trump’s efforts to hold back history, the world is going to leave oil and gas because the Earth can’t stand it, Wolff said. “That means even though the price of oil is very high now because the Strait of Hormuz is closed, the longer-term prospects of oil are terrible.” —Whitney Curry Wimbish

Thanks for reading. If you have tips or ideas for future stories, let us know! You can email us at aftermath@prospect.org.