The conflict in the Middle East has catalyzed strong performance from oil and gas giants. Exxon Mobil Corporation (XOM.US) reported its highest profits since the Russia-Ukraine conflict began.

As the conflict between the U.S. and Iran enters its sixth month, driving crude oil prices continuously higher and expanding fuel refining profit margins, the profits of American oil and gas giant Exxon Mobil Corporation (XOM.US) still fall slightly short of market expectations. The performances of Exxon Mobil Corporation, Chevron Corporation, and Shell, the three major traditional energy giants, have significantly benefited from this years rise in oil prices and strong refining profits, with upstream operations achieving higher oil realization prices while the refining sector simultaneously gains from global fuel shortages and record cracking spreads. Although the stock prices of these three companies have been on a clear upward trajectory this year, the market has not considered the war profits as permanent earnings, so the growth in profits has not translated into a proportionate expansion in valuations and stock prices. Exxon Mobil Corporation's adjusted earnings per share for the second quarter were $3.52, 2 cents below the average expectation of Wall Street analysts. Part of the reason for Exxon Mobil Corporation's performance falling short of expectations was the maintenance of refineries, which prevented it from fully capitalizing on strong earnings due to high gasoline, diesel, and aviation fuel prices. Nonetheless, this energy giant reported total profits of $14.7 billion for the second quarter, the highest level since the start of the Russia-Ukraine war in 2022 and the disruption of the European energy crisis. The profit data announced on the same day by Exxon Mobil Corporation and Chevron Corporation showed significant increases, continuing the strong performance trend recently reported by Shell and TotalEnergies. Following the breakdown of a truce around July 7, with the U.S. resuming threats and launching strikes, the political conflict involving the GEO Group Inc in the Middle East escalated again. By July 31, during trading, the international oil benchmarkBrent crude oiltraded at around $90.04, while the North American pricing benchmarkWTI cruderose to approximately $84.77; both increased by about 21.4% and 20.3%, respectively, compared to July 7. In other words, this years oil price rise can be roughly divided into two phases: the first half driven by the outbreak of war, stockpiling tensions, and risks in the Strait of Hormuz, while the second half stems from the breakdown of the ceasefire, renewed shipping restrictions, and the spreading risks in the Red Sea. Based on prices from the beginning of the year to the current trading price, Brent and WTI have accumulated increases of about 48.2% and 47.9%, respectively; however, Brent had surged above $125 during the GEO Group Inc political conflict in April, indicating that current prices have retraced part of the war peak risk premium. Refinery maintenance obscures oil price gains: Exxon Mobil Corporation reports record profits since the Russia-Ukraine conflict, but still misses "the last two cents" Exxon Mobil Corporations adjusted earnings per share for the second quarter were $3.52, 2 cents lower than Wall Street analysts' average expectation. However, Exxon Mobil Corporation reported its second-quarter profits reached a four-year high, with free cash flow of approximately $17.2 billion representing a significant year-over-year increase of 219.6%. The company returned approximately $9.4 billion to shareholders for the quarter, including $4.3 billion in dividends and $5.1 billion in buybacks, while reducing net debt by about $7 billion; it still aims for about $20 billion in buybacks for the entire year. Exxon Mobil Corporation's total revenue for Q2 was $116.02 billion, a substantial year-over-year increase of 42%; the net profit under GAAP conditions was approximately $14.525 billion, the highest since the 2022 energy crisis, indicating a year-over-year growth of 105%. Strictly according to Exxon Mobil Corporations latest adjusted standards, the adjusted profit base for the second quarter of 2025 is $6.972 billion, thus Exxon Mobil Corporations approximately $14.680 billion adjusted profit for the second quarter of 2026 represents an actual year-over-year growth of about 110.6%. Free cash flow increased to $17.236 billion, which not only exceeds adjusted profits but is also equivalent to 117% of adjusted profits; last years conversion rate was only about 77%. This indicates that profit growth is strongly supported by cash and not mainly derived from accounting estimates or receivables. Working capital released approximately $2.099 billion in cash this quarter, positively contributing to operating cash flow. The blockade of the Strait of Hormuz, leading to the largest oil supply disruption in human history, is bringing substantial profits to large integrated oil companies worldwide. The energy supply from the Strait of Hormuz, which accounts for 20% of global oil and liquefied natural gas transportation, has been hindered, prompting customers to seek alternative sources. Affected by sporadic ceasefire agreements and negotiations between the U.S. and Iran, crude oil prices retreated after surpassing $125 per barrel in April, but refining profit margins remain close to record highs, indicating that some excess profits are likely to continue into the second half of this year. As shown in the figure above, the unexpected windfall for large oil companiesadjusted profits for the second quarter could reach the third highest level in history. Note: The second quarter of 2026 data for Exxon Mobil Corporation, Shell, Chevron Corporation, and TotalEnergies is based on actual figures, while BP p.l.c. Sponsored ADR data is estimated. The windfall profits of large oil companies have become a focal point of political controversy, as high energy prices are driving inflation globally, particularly in the U.S., where gasoline prices have once again surpassed $4 per gallon. The retail price of diesel, the "primary fuel" for the global economy, has risen by more than 40% compared to pre-war levels. Last month, President Donald Trump ordered the Justice Department to investigate fuel prices, claiming their decrease has not been fast enough. Exxon Mobil Corporation missed part of the windfall from rising oil prices Overall, aside from the adjusted profit of $14.7 billion, the most prominent signals from Exxon Mobil Corporation's second quarter are explosive growth in revenue, operating cash flow, free cash flow, and refining/chemical profits, but the interruptions in Middle Eastern production and planned refinery maintenance have prevented the company from fully converting extremely high oil prices and refining profit margins into above-expectation earnings per share. Exxon Mobil Corporations refining business achieved profits of $4.1 billion, a year-on-year increase of 200%, reaching a four-year high, but still significantly lower than the analyst estimate of $5.37 billion. The company stated that the record production of diesel for the quarter was offset by profit impacted by planned maintenance. As shown in the figure above, refining profits reached record highsfuel refining margins along the U.S. Gulf Coast are at historical peaks. According to the adjusted standards that better reflect the underlying operating conditions, upstream business profits were $9.189 billion, a 70.1% increase from $5.402 billion in the same period last year; energy products business, which is Exxon Mobil Corporation's refining operations, saw profits increase from $1.366 billion to $4.099 billion, a year-on-year growth of about 200%; profits from chemical products rose from $293 million to $1.214 billion, an increase of approximately 314%; and specialty product profits improved from $780 million to $969 million, an increase of about 24%. This indicates that Exxon Mobil Corporation does not rely solely on rising crude oil prices; upstream, refining, chemical, and lubricants all contribute to profits, demonstrating the advantages of vertical integration amid disruptions in energy supply. Although the refining business achieved its highest profit in four years and a record second quarter diesel production, $4.099 billion still fell short of analyst expectations of $5.37 billion, with planned maintenance being a significant drag. This is also why the overall profit was extremely high, and revenue significantly exceeded expectations, yet adjusted EPS still slightly lagged market estimates: Exxon achieved an excellent refining market environment but did not capture all theoretical profits. The traditional energy industry organization in the U.S. insists that high profits are merely the result of supply-demand imbalances, and companies that responded to President Trumps requests and actively increased production are being rewarded. Exxon Mobil Corporation reported a total energy production of 4.514 million barrels of oil equivalent per day in the second quarter, down approximately 2.5% from 4.63 million barrels in the same period last year. The decline is largely attributed not to depletion of core oil fields but to the impact of Middle Eastern conflicts, such as the attack on Qatar's LNG facilities and the inability to transport some output from the UAE; approximately 450,000 barrels of oil equivalent per day of Qatar's output remains offline. Excluding disturbances in the Middle East, the company states that upstream production is at its highest level for the same period in over two decades. The true structural highlight is that production in the Permian Basin has exceeded 1.8 million barrels of oil equivalent per day, marking at least a 12.5% increase from approximately 1.6 million barrels in the same period of 2025 and aligned with the companys plan to maintain about 9% compound growth by 2030. The fifth FPSO in Guyana is expected to start production in the fourth quarter, adding approximately 250,000 barrels per day in capacity, so Exxons mid-term production growth will still be mainly driven by the low-cost, long-life Permian Basin and Guyana. Chief Financial Officer Neil Hansen stated in a media interview that despite the impressive profits, the oil industry remains a low-margin industry. Our scale is not sufficient to influence prices; in fact, no single company can accomplish that. Exxon Mobil Corporation has been increasing oil production in the Permian Basin and Guyana, driving the companys overall daily production to around 4.5 million barrels of oil equivalent. The Permian Basin currently accounts for about 40% of the companys total global production. The surge in profits among large oil companies has not translated into higher stock prices. Since the outbreak of war between the U.S. and Iran at the end of February, Exxon Mobil Corporation's share price has risen by less than 3%, primarily because investors believe that profit growth driven by war is difficult to sustain.