Key Takeaways
- The Middle East conflict resulted in Exxon Mobil losing 6% of worldwide oil and gas output during Q1 2026 as Strait of Hormuz operations were disrupted.
- Iranian missile attacks caused significant damage to two LNG production trains at a Qatari facility where Exxon holds a partnership stake, with restoration potentially taking years.
- Higher energy prices triggered by regional instability could deliver upstream earnings gains reaching $2.9 billion to partially offset production losses.
- The refining and trading segment faces a $5.3 billion Q1 earnings reduction, primarily from hedging timing mismatches that management expects will eventually reverse.
- Shares of XOM declined 6.1% during premarket hours Wednesday after President Trump announced a two-week ceasefire, triggering broad energy sector weakness.
Shares of Exxon Mobil (XOM) tumbled 6.1% in premarket activity Wednesday.
The opening quarter of 2026 proved exceptionally complex for Exxon. Armed conflict between U.S.-Israeli forces and Iran commenced February 28, driving crude prices up as much as 65% while essentially shutting down the Strait of Hormuz—a critical chokepoint responsible for approximately one-fifth of worldwide energy transport.
For the energy giant, Q1 delivered a mixed bag of substantial figures moving in opposing directions.
The corporation reported first-quarter oil and gas output fell 6% compared to Q4 2024 levels, when production stood at the equivalent of 5 million barrels daily. Operations in the UAE and Qatar represented 20% of Exxon’s total global production throughout 2025.
Approximately half of these production losses stemmed from a liquefied natural gas facility in Qatar where Exxon maintains a partnership position. Two LNG production trains at the site sustained damage from Iranian missile attacks. The company stated that “public reports indicate the damage will take a prolonged period to repair,” noting it couldn’t verify repair schedules until completing an on-site assessment. Qatari officials estimate the facility could forfeit $20 billion in yearly revenue and require up to five years for full restoration.
On a positive note, elevated crude and natural gas prices are projected to contribute approximately $2.1 billion and $400 million respectively to Q1 upstream earnings—combining for potential gains of $2.9 billion that could more than compensate for lost production.
Refining Segment Faces Timing-Related Losses
The more immediate investor concern centers on downstream operations. Exxon’s energy-products division—encompassing refining and commodity trading—is expected to show earnings roughly $3.7 billion below Q4 2025 levels.
The primary driver is an accounting mismatch within Exxon’s hedging operations. Similar to other major oil companies, Exxon employs financial derivatives to secure prices during cargo transit—shipments from American ports to Asian markets can require several weeks. Revenue from these physical deliveries isn’t booked 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.”
The company will additionally record impairment charges between $600 million and $800 million due to supply chain disruptions that prevented certain physical deliveries linked to existing hedging positions.
Market Analyst Perspectives
JPMorgan strategists noted in an April 6 report that the war “has upended the perception of the Gulf as a safe and investable hub,” warning 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 versus Q4 2025, according to LSEG data.
European competitor Shell similarly released a trading update Wednesday, disclosing reduced quarterly gas output attributable to the regional conflict.
Exxon plans to announce complete Q1 financial results May 1. When excluding timing-related effects, the company indicated earnings per share exceeded the previous quarter.
