Where oil flows, profits follow

The first period in which oil companies reported record profits was not 2026. In the summer of 2008, when the price of a barrel of oil reached $147, ExxonMobil posted the highest annual profit ever reported by an American company up to that point. Then, in 2022, when Russia’s invasion of Ukraine sent prices soaring, the record was broken yet again: Exxon’s single-year profit exceeded $55 billion, while Shell reported its highest profit in 115 years and Chevron reached a record high. Rising prices have always meant the same thing for oil companies: profits.

At first glance, 2026 appears to be repeating this pattern. The war launched by the U.S. and Israel against Iran on Feb. 28 briefly pushed Brent crude oil prices from $70 to over $126. In the second quarter of the year, the world’s eight largest oil producers reported a combined net profit of $93 billion, and their market capitalization exceeded $3 trillion. According to data compiled by Bloomberg, this quarter went down as the third-highest on record, surpassed only by the first two quarters of 2022.

The reasons behind the profits reported in 2026 are different this time. We cannot simply attribute the reported quarterly increases to price hikes, as we did in 2008 and 2022. In those years, many oil giants reported profits because the most significant factor was price volatility. Behind the massive profits announced by the giants in the second quarter of 2026, however, lies reality: the Strait of Hormuz.

Impact of price increases

While Saudi Aramco reported the highest profit for the second quarter of 2026 at approximately $32 billion, it also had the weakest growth rate. This is because Aramco was right in the middle of the conflict. Shipping disruptions in the Strait of Hormuz and attacks on its facilities forced it to reduce production by a quarter compared to the previous quarter. Despite this constraint, the profits that were achieved can be attributed in part to price increases.

In contrast, the companies geographically farthest from the conflict reported the largest profits. Chevron nearly quadrupled its second-quarter 2026 profit, a 385% increase compared to the same quarter of the previous year. ExxonMobil doubled its profit to $14.5 billion, while Italy’s Eni reported an increase of nearly fivefold.

However, high prices were not the sole reason for these reported profits. When the Strait of Hormuz was blocked, Asian and European buyers, unable to access Middle Eastern oil, turned to other sources. As a result, producers located far from the Gulf, whose production continued uninterrupted, began not only selling at higher prices but also selling greater volumes. Due to the occasional closure of the Strait and rising security concerns, Gulf-based companies saw both a decline in the volume they could sell and an increase in transportation and security costs.

Consequently, profits shifted geographically to companies located outside the Strait, both in terms of price and the customer base. In short, the same war environment reduced exports for some while opening new markets for others. Furthermore, the war created opportunities for companies to make inexpensive purchases. A top executive at TotalEnergies revealed that they were purchasing oil from within the Persian Gulf for $50 to $60 per barrel, while the cost of tanker transit through the Strait was approximately $10. In other words, companies able to acquire and transport the crude oil that had become cheaper due to being trapped in the Strait turned the difference into profit.

A second factor setting 2026 apart from other years came from refineries. Refineries, where crude oil is converted into gasoline, diesel and jet fuel, generate profits from the difference between the price of the products they sell and the price of the crude oil they purchase, the so-called “refining margin.”

What’s interesting is that in 2008, high crude oil prices had squeezed this margin because product demand had weakened as the world entered a recession. In 2026, however, the opposite occurred. As the effective closure of the Strait of Hormuz and Ukraine’s attacks on Russian refineries simultaneously curtailed global fuel production, diesel and gasoline prices rose even faster than crude oil prices, and the margin widened. Thus, the giants with refineries profited twice: both from the high price of the crude oil they produced and from the widening refining margin.

The same dynamic played out in the natural gas market. As part of Gulf gas was withdrawn from the market due to damage to a facility in Qatar during the war, U.S. liquefied natural gas exporters, who are not reliant on the Strait, filled this gap.

Controlled tension for profit

So does all this profit mean that oil companies want the war to drag on? The picture is more complex than it appears. The industry actually does not prefer high prices, but prices that stay within a certain range, which generally means between $60 and $90 per barrel. When prices rise far above this level, demand in the market begins to fall. Rising energy prices slow down the economy, increase the risk of a recession and eventually push consumers toward alternatives, such as renewables.

Indeed, throughout 2026, the Organization of the Petroleum Exporting Countries (OPEC) lowered its forecast for global demand growth four times, bringing it down to 580,000 barrels per day. The International Energy Agency (IEA), meanwhile, reversed its previous growth forecast and projected a demand decline of 1.6 million barrels per day for this year.

What companies want is not an escalation of the war, but for a certain level of tension to continue in a controlled manner. A war that spirals out of control and inflicts major damage on infrastructure and demand will, in the end, dismantle the “winners’ club” as well. As we approach the end of summer, this is precisely the scenario we face: a never-ending war, the Strait of Hormuz remaining closed, and oil prices hovering around $90 per barrel. The market has settled into what Goldman Sachs calls a “tenuous equilibrium.”

On the other hand, this type of unexpected profit is referred to in the literature as a “windfall,” that is, profit carried along by the wind. A similar debate took place in 2022, when the United Kingdom and the European Union imposed a temporary windfall tax, while the United States debated the issue but did not implement it. An academic study calculated that oil and gas companies’ global profits reached $916 billion that year. The largest share, approximately $301 billion, went to the U.S., and within the U.S., half of that profit flowed to the wealthiest 1%. Today, there are three separate bills in the U.S. Congress targeting these profits. Five EU countries are calling for a second windfall tax. Wood Mackenzie, meanwhile, estimates that the sector is heading toward an additional $495 billion in profits this year, exceeding pre-war expectations.

That’s why saying “the war benefits oil companies” falls short. 2026 showed that companies’ ability to make such high profits depended on two things: prices remaining high but not at a level that would cripple the economy, and the company actually being able to sell at that price. What determined this was the company’s distance from the Strait of Hormuz. The reason one company posted a loss while another announced record profits during the same war was not price, but geography.

In short, oil companies neither want the war to end immediately nor for it to spiral completely out of control; what they want is for prices to remain at this high but profitable level. But no one can ensure this alone. What 2026 has shown is this: who stands to gain from a war and who faces hardship is often determined not by developments on the ground, but by which routes oil – still the most decisive factor in geopolitics – can travel.

DAILYSABAH