The ongoing Iran war has had divergent impacts on major global energy players. Japan's five largest trading houses reported limited negative effects on their earnings from the conflict, with all forecasting profit increases for the current fiscal year as of their Friday earnings announcements [1]. Executives from these companies highlighted their diversified portfolios and proactive risk management strategies, which they believe position them to benefit from volatility in global energy and petrochemical supply chains. They cited the potential for higher margins and increased trading opportunities if supply disruptions persist or escalate, while also emphasizing the establishment of buffers and flexible supply arrangements to mitigate downside risks [1]. Market analysts noted that the trading houses' exposure to energy, metals, and other commodities could provide a tailwind if supply chain disruptions drive up prices. Management teams signaled a commitment to stable earnings and prudent capital management, rather than aggressive speculation, but indicated the possibility of upward profit revisions if market conditions become more favorable, especially in energy and petrochemicals [1].
In contrast, Exxon Mobil (XOM) and Chevron (CVX), the two largest U.S. oil companies, reported significant year-over-year profit declines for the first quarter, despite a 57% surge in oil prices following the U.S. and Israel's attack on Iran on February 28, which caused the largest oil supply disruption in history [2]. Exxon's net income fell 45% to $4.2 billion ($1.00 per share) from $7.7 billion ($1.76 per share) a year earlier, while Chevron's profit dropped 36% to $2.2 billion ($1.11 per share) from $3.5 billion ($2 per share) [2]. Both companies, however, beat Wall Street's earnings estimates after adjustments: Exxon posted adjusted earnings per share of $1.16 on $85.14 billion in revenue, and Chevron reported $1.41 per share (beating the $0.95 estimate) on $48.61 billion in revenue [2].
The earnings declines were attributed to unfavorable financial hedges triggered by the sudden supply disruption. Exxon lost nearly $4 billion on open hedges due to a timing effect, as the value of hedged product shipments was not counted in the quarter because deliveries were incomplete. Additionally, Exxon took a $700 million hit on closed hedges not offset by physical deliveries due to Middle East disruptions. The company stated that these impacts are temporary and expects the hedges to result in a net profit in subsequent quarters once deliveries are completed [2]. Chevron booked a $2.9 billion charge related to its financial hedges but still achieved its largest earnings beat since October 2020 after adjustments [2].
Market reactions were positive in premarket trading, with Exxon shares up more than 1% and Chevron gaining about 2% after both companies beat earnings estimates [2]. Chevron CEO Mike Wirth commented that the global energy system remains under extreme stress and warned that oil prices will continue to rise until the Strait of Hormuz is reopened [2].
While Japan's trading houses are positioning for potential upside and stable growth amid the conflict, Exxon and Chevron are navigating short-term financial headwinds from hedging losses, with expectations of future recovery as market conditions evolve.
CONCLUSION
The Iran war has created both challenges and opportunities in the global energy sector. Japan's trading houses are forecasting profit growth and see potential benefits from ongoing supply disruptions, while Exxon and Chevron have experienced significant profit declines due to unfavorable hedging outcomes, despite beating earnings estimates. Market sentiment remains cautiously optimistic, with expectations of future recovery as the situation develops.