US-Iran conflict pushes oil past $70, boosting major petroleum giants' profit margins

The escalating conflict between the United States and Iran has led to tightening supplies in the global crude oil market, causing oil prices to rise significantly in recent times. In their newly released quarterly financial reports, major U.S. oil giants recorded substantial increases in both revenue and profit, driven by higher oil prices and expanded refining margins. This trend not only reflects the direct impact of geopolitical risks on the energy market, but also highlights the crucial position of the U.S. energy industry within the global supply chain.

Since early 2024, tensions between the U.S. and Iran have continued to escalate, with both sides trading accusations and strengthening their military deployments. The U.S. has implemented strict sanctions against Iran to restrict its oil exports, while Iran has used this as leverage against U.S. pressure. With output from Iranian oilfields restricted, global oil supplies have declined, and the market anticipates that shortages will persist. Consequently, the Organization of the Petroleum Exporting Countries (OPEC) and its partner countries (OPEC+) announced the extension of their production cut plans during the same period, further suppressing market supply. Together, these two forces pushed the prices of Brent crude and West Texas Intermediate (WTI) above the 70-dollar-per-barrel mark over the past month.

Against this backdrop, major U.S. oil companies—including ExxonMobil, Chevron, ConocoPhillips, and Royal Dutch Shell (whose U.S. subsidiary is also a major player)—all reported significant increases in operating revenue and net profit in their latest financial statements. ExxonMobil's net profit grew by more than 30 percent compared to the same period last year, primarily benefiting from an increase in refining margins from about 1.5 dollars the previous quarter to nearly 2.0 dollars, while its crude procurement costs remained relatively stable. Chevron reported that its global refining capacity utilization rate rose to 92 percent, well above the industry average, which further boosted profits. ConocoPhillips benefited from lower crude procurement costs in North America and rising sales prices in Asian markets, providing additional support for its revenue growth.

The stock market reacted enthusiastically. Major U.S. energy stocks generally rose by over 5 percent on the trading day following the earnings announcements, with the share prices of ExxonMobil and Chevron climbing 6 percent and 5.8 percent, respectively. Investors widely viewed this profit surge as a positive indicator for future oil price trends, while treating U.S. energy companies as a defensive investment against inflation. Analysts pointed out that although oil prices might experience short-term downward adjustments due to market volatility, geopolitical risks and production cuts will continue to support high oil prices over the long term.

However, rising oil prices are simultaneously placing pressure on the global economy and inflation. Domestically in the U.S., rising energy costs are driving up production expenses for the automotive, aviation, and manufacturing sectors, which in turn pushes up the Consumer Price Index (CPI). Internationally, energy import costs have climbed for many European and Asian countries, posing challenges to their economic growth and trade balances. On the other hand, higher oil prices have also prompted some nations to accelerate energy diversification and investments in renewable energy to reduce their reliance on Middle Eastern oil.

Looking ahead, while the U.S.-Iran conflict has not yet concluded and oil prices may still fluctuate based on developments in the situation, the financial reports of the oil majors indicate that companies will continue to profit from high oil prices amid ongoing supply tightness and production cuts. Investors and policymakers need to closely monitor geopolitical dynamics and changes in market supply and demand in order to formulate corresponding risk management and energy policies. (Source of Facts: Central News Agency)