Key Takeaways

  • The U.S.-Israeli conflict with Iran caused Exxon to lose 6% of worldwide oil and gas output during Q1 2026, primarily from Strait of Hormuz disruptions.
  • Iranian missile attacks damaged two LNG production trains at a Qatar-based facility, with restoration efforts projected to span multiple years.
  • Higher crude and natural gas prices driven by the conflict could add approximately $2.9 billion to upstream earnings.
  • The downstream segment faces a $5.3 billion Q1 earnings decline, largely from accounting timing gaps related to oil trading hedges — impacts the company expects to reverse.
  • Shares of XOM declined 6.1% during premarket hours Wednesday as energy sector stocks pulled back following President Trump’s announcement of a two-week ceasefire.

Shares of Exxon Mobil (XOM) dropped 6.1% in premarket activity Wednesday.


XOM Stock Card
Exxon Mobil Corporation, XOM

The first quarter presented substantial challenges for Exxon. The conflict between U.S.-Israeli forces and Iran, which commenced on February 28, drove oil prices upward by as much as 65% while effectively shutting down the Strait of Hormuz, a critical passage responsible for approximately one-fifth of worldwide energy transport.

Exxon’s quarterly performance reflected a mix of contrasting financial impacts.

The energy giant reported that Q1 oil and gas production fell 6% below Q4 2024 levels, when daily output stood at the equivalent of 5 million barrels of oil. Operations in Qatar and the UAE represented 20% of Exxon’s total global production throughout 2025.

Approximately half of these production losses originated from a liquefied natural gas facility in Qatar where Exxon holds a partnership stake. The complex sustained damage to two LNG production trains during Iranian missile attacks. Exxon announced in a statement that “public reports indicate the damage will take a prolonged period to repair,” while noting the company cannot confirm a specific timeline until completing an on-site assessment. Qatari officials estimate the facility may lose $20 billion annually and require up to five years for complete restoration.

Meanwhile, elevated crude oil and natural gas prices are projected to contribute roughly $2.1 billion and $400 million respectively to upstream Q1 earnings — combining for potential gains of $2.9 billion that exceed the losses from reduced production.

Investors are focusing attention on challenges within the downstream operations. Exxon indicated that earnings from its energy-products division — encompassing refining and trading activities — will decline by approximately $3.7 billion compared to Q4 2025.

The primary driver is an accounting timing mismatch in Exxon’s hedging operations. Similar to other major oil companies, Exxon employs financial derivatives to secure prices during cargo transport — with shipments from U.S. facilities to Asian markets often requiring weeks. The financial value of these physical deliveries remains unrecognized in earnings statements until transactions finalize.

CFO Neil Hansen characterized the negative timing impact as “unusually large” while emphasizing its temporary nature. “These impacts will unwind over time and will result in net positive profit once the underlying transactions are complete,” Hansen explained. “These are sound trades and the profitability that will result from them will be material.”

Exxon will additionally record an impairment ranging from $600 million to $800 million, stemming from supply disruptions that prevented certain physical deliveries connected to existing hedging contracts.

Analyst Perspectives

JPMorgan strategists observed in an April 6 report that the war “has upended the perception of the Gulf as a safe and investable hub,” cautioning that Qatar and Kuwait face severe near-term economic hits.

Benchmark Brent crude prices averaged $78.38 per barrel throughout Q1 2026, representing a 24% increase from Q4 2025, according to LSEG data.

European competitor Shell released a trading update Wednesday as well, disclosing reduced quarterly gas production stemming from the conflict.

Exxon plans to release complete Q1 results on May 1. When excluding timing effects, the company indicated per-share earnings exceeded the previous quarter.