Exxon Warns Of $6.5 Billion Hit From Iran War As Q1 Earnings Set To Print Slightly Below Consensus

ExxonMobil projects a significant impact on its first-quarter earnings due to the Iran war, warning of a $6.5 billion hit. However, the majority of this figure stems from unfavorable accounting for hedging contracts, which is expected to reverse as transactions complete. Global oil and gas production is anticipated to be 6% lower in Q1 compared to Q4 2025 because of attacks on Qatar and UAE facilities where Exxon holds stakes. Volume disruptions at its production and refining businesses are estimated to reduce earnings by $400 million to $800 million. Additionally, trading losses from undelivered physical cargoes hedged with derivatives will cost another $600 million to $800 million. The largest hit, between $3.5 billion and $4.9 billion, is linked to oil price surges and the accounting of financial derivatives used for hedging. This negative impact is described as a "LIFO timing effect" that will resolve in future quarters, ultimately leading to net positive profit. Despite these challenges, the surge in oil and gas prices due to the Middle East conflict will boost first-quarter earnings by $2.1 billion to $2.9 billion. Excluding these timing effects, Exxon's earnings would have shown sequential improvement. Exxon's Middle East portfolio, representing 20% of its upstream production, was negatively impacted by a 6% reduction in Q1 upstream volumes.