Key Takeaways
- The oil giant experienced a 6% decline in worldwide oil and gas output during Q1 2026 following the U.S.-Israeli military action against Iran and Strait of Hormuz shutdowns.
- Iranian missile attacks damaged a pair of LNG production units at Exxon’s Qatar partnership facility, with restoration projected to require several years.
- Higher commodity prices stemming from regional tensions could deliver upstream earnings gains approaching $2.9 billion.
- The refining and trading segment faces a $5.3 billion quarterly setback, primarily driven by derivative accounting mismatches — though management indicates these effects are transitory.
- Shares of XOM declined 6.1% during premarket hours as energy sector equities retreated following President Trump’s announcement of a 14-day ceasefire.
Exxon Mobil (XOM) experienced a 6.1% decline in premarket activity Wednesday morning.
The opening quarter of 2026 presented extraordinary challenges for Exxon. Military operations involving U.S. and Israeli forces against Iran — initiated February 28 — propelled crude prices upward by as much as 65% while essentially shutting down the Strait of Hormuz, a critical shipping channel responsible for approximately one-fifth of worldwide energy transportation.
The outcome for Exxon was a quarterly performance marked by dramatic swings across different business segments.
According to company disclosures, first-quarter hydrocarbon production dropped 6% compared to the final quarter of 2024, when daily output reached the equivalent of 5 million barrels of oil. Operations in Qatar and the United Arab Emirates represented 20% of Exxon’s total global production throughout 2025.
Approximately half of these production losses originated from a liquefied natural gas facility in Qatar where Exxon maintains a partnership stake. The complex sustained damage to two LNG production trains during Iranian missile strikes. Company representatives stated that “public reports indicate the damage will take a prolonged period to repair,” noting they cannot verify restoration timelines without conducting an on-location assessment. Qatari officials have projected potential annual revenue losses of $20 billion from the facility and estimated reconstruction could extend five years.
Balancing these setbacks, elevated pricing for crude oil and natural gas is projected to contribute approximately $2.1 billion and $400 million respectively to upstream first-quarter profits — combining for potential gains reaching $2.9 billion that exceed production-related losses.
Refining Segment Faces Accounting-Driven Setback
The more pressing near-term issue for shareholders involves the downstream operations. Exxon disclosed that its energy-products division — encompassing refining and commodity trading — will register earnings approximately $3.7 billion below Q4 2025 levels.
The primary driver is a timing mismatch in Exxon’s derivative hedging strategy. Similar to other major oil companies, Exxon employs financial instruments to secure pricing while cargo shipments are in transit — voyages from American ports to Asian destinations can span multiple weeks. Revenue from these physical deliveries isn’t recorded until transactions conclude.
CFO Neil Hansen characterized the adverse timing effect 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 book an impairment charge ranging from $600 million to $800 million, reflecting supply chain disruptions that prevented certain physical deliveries connected to existing hedge positions.
Market Observers Weigh In
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 averaged $78.38 per barrel during Q1 2026, up 24% from Q4 2025, per LSEG data.
European rival Shell also published a trading update Wednesday, reporting lower quarterly gas production due to the conflict.
Exxon is set to report full Q1 results on May 1. Excluding timing effects, the company said per-share earnings were higher than the prior quarter.
