News analysis
Wars have often reshaped the global economic order, and the ongoing conflict between the United States and Iran is proving no exception. While the fighting choked shipping through the Strait of Hormuz, damaging Iran’s energy infrastructure and placing new pressure on its oil-dependent economy, it also boosted profits for Western energy companies and altered the competitive balance among the Persian’s Gulf wealthyoil producers.
The Iran conflict reshaped the energy markets in two ways: It changed who could securely meet the energy demand of the world and it changed the regional geopolitics of the Middle East by exposing the vulnerabilities of American adversaries while strengthening new regional leadership in the apparent favor of the United States.
Throughout the conflict, U.S. President Donald Trump alternated between expletive-laden threats, calls for peace talks, and warnings to Iran. Meanwhile, beyond the military confrontation, the region’s energy landscape has continued to evolve, with Western oil companies and several U.S. partners in the Gulf emerging among the principal beneficiaries.
Western companies post record profits
As the conflict continues disrupting the oil markets and drastically increasing the prices of oil and natural gas worldwide, masjor Western energy companies increased their profits by huge margins.
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Europe’s six largest oil companies gained a combined 40 percent compared to their last year’s profits, posting a cumulative first-quarter profits of $22 billion, according to an Aug. 4 Associated Press (AP) report.
Texas-based energy giants Chevron and ExxonMobil also reported strong earnings.
Chevron reported second-quarter profits of $12 billion through the end of June, roughly four times higher than during the same period last year, according to the company’s earnings report.
ExxonMobil posted even stronger results, reporting quarterly profits of $14.5 billion — about double its earnings from the same quarter a year earlier, according to the company’s July financial report.
The gains were also reflected in financial markets. Shares of major oil companies have risen roughly 20 to 30 percent this year, compared with about 13 percent for the S&P 500, the Associated Press reported.
The earnings also drew criticism from Trump, who accused ExxonMobil and Chevron of “making too much money” by raising fuel prices during the conflict.
On Aug. 2, the president urged U.S. energy companies to lower retail fuel prices. Chevron Chairman and Chief Executive Officer Mike Wirth, however, attributed the company’s performance to disciplined operations during a period of geopolitical uncertainty.
“Our strong second quarter performance is a result of disciplined investment and strong execution that drove record U.S. upstream production, record crude throughput in our U.S. refineries, and exceptional reliability across key assets,” he said.
Timothy Fitzgerald, a business economics professor at the University of Tennessee, told the Indian Express that the impact of the conflict depends largely on where companies produce oil.
Producers operating outside the Gulf—including U.S. companies and other international energy firms—have generally benefited from higher prices while avoiding many of the region’s logistical disruptions.
By contrast, Fitzgerald said producers in the Middle East have faced damaged infrastructure, export disruptions, higher transportation costs, and increased security expenses.
Consumers, meanwhile, have borne much of the burden through higher fuel prices and rising costs for everyday goods, he said, because energy prices feed into the cost of producing and transporting most products.
Reshaping the Gulf energy ecosystem
The conflict hasn’t changed the oil production hierarchy in the Gulf region, but it has certainly altered the market share of export among local oil producers, according to a June report by the US Energy Information Administration (EIA).
Countries with alternative export routes — notably Saudi Arabia and the United Arab Emirates — have been better positioned to maintain shipments, while producers that rely heavily on the Strait, including Iran, Iraq, Kuwait, Qatar, and Bahrain, have faced greater challenges.
Adi Imsirovic, a senior associate with the Center for Strategic and International Studies’ Energy Security and Climate Change Program, argued in a March analysis that the principal issue was not a shortage of oil but the availability of secure transportation routes from the Persian Gulf.
According to the EIA, the United Arab Emirates and Saudi Arabia are the region’s only major oil exporters capable of rerouting substantial crude exports around the Strait of Hormuz during periods of disruption.
The UAE has redirected exports through the Abu Dhabi Crude Oil Pipeline (ADCOP) to the port of Fujairah on the Gulf of Oman, bypassing the Strait. Saudi Arabia has rerouted crude through its East-West Pipeline to the Red Sea port of Yanbu.
“Similarly, Saudi Arabia rerouted crude oil exports to the Red Sea via its 7 million-b/d East-West pipeline to the port of Yanbu on the Red Sea, with 5 million b/d of that capacity available for exports and the rest for domestic consumption,” the EIA said.
According to the agency, those investments have significantly reduced the amount of production that Saudi Arabia and the UAE have been forced to shut in compared with Gulf producers that remain dependent on the Strait of Hormuz.
The improved export position has also been reflected in corporate earnings. According to the Associated Press, Saudi Aramco reported second-quarter net income of $32.69 billion, a 44 percent increase from a year earlier, driven by higher prices for crude oil, refined products, and petrochemicals.
The changing energy landscape also provides context for renewed cooperation between Iran and Oman on maritime navigation. On Wednesday, Iranian Foreign Ministry spokesperson Esmaeil Baghaei announced that the two countries had reached an understanding on geographic coordinates for a shipping route through the Strait of Hormuz.
Baghaei cautioned, however, that any agreement currently under discussion would not by itself guarantee security in the strategic waterway, Reuters reported.
Shift in regional geopolitical influence
Beyond reshaping Gulf energy exports, the conflict has also shifted aspects of the region’s geopolitical balance, strengthening Saudi Arabia’s position as one of Washington’s closest partners in the Middle East.
The stated objective of the U.S. military’s Operation Epic Fury was to counter what Washington described as Iran’s “imminent threat,” citing Tehran’s missile capabilities, nuclear ambitions, and support for armed groups across the region that the United States considers Iranian proxies.
Against that backdrop, the U.S.-Saudi civilian nuclear agreement signed on July 22, which allows Riyadh to enrich uranium domestically, has been viewed by some analysts as part of Washington’s broader strategy to counter Iran’s regional ambitions. The timing of the agreement, coming amid U.S. military strikes, also sent a political signal to Tehran.
“Washington telegraphed its intentions to Tehran that any Iranian efforts to continue with the quest to acquire a military nuclear capability—and thereby dominate the Arab Gulf region—would be ‘balanced’ with the presence of similar nuclear capabilities in the Kingdom of Saudi Arabia,” Joseph A. Kéchichian, a senior fellow at the King Faisal Center for Research and Islamic Studies in Riyadh, told Vision Times in an earlier interview.
Another factor benefiting U.S. energy producers is the structure of the American oil market. Although the United States imports only a small share of its crude oil from the Persian Gulf — about 8 percent last year, according to FactCheck.org — global oil prices still rise when supplies from the region are threatened. Because U.S. production remains relatively insulated from disruptions in Gulf exports, higher international prices can improve earnings for American oil companies.
“The US is definitely affected,” Mark Finley, a nonresident fellow in energy and global oil at Rice University’s Baker Institute, told Fact Check, adding that anything wrong somewhere impacts the prices “everywhere.”
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