TL;DR

Exxon Mobil (XOM) and Chevron (CVX) reported Q1 2026 profits that collapsed year-over-year, with Exxon net income down 45% and Chevron down 36%. The culprit: the Iran war-driven oil supply disruption caused billions in hedging losses for both companies. Despite the income declines, both firms beat Wall Street estimates and rose more than 1-2% in premarket trading. As the US War Powers Resolution 60-day deadline expires today (May 1), oil prices and energy sector equities are at an inflection point.

What Happened

Exxon Mobil and Chevron released their Q1 2026 earnings on Friday, May 1, the same day the War Powers Resolution's 60-day deadline for US military involvement in the Iran conflict arrives.

Exxon posted net income of $4.2 billion ($1.00 per share), down sharply from $7.7 billion ($1.76 per share) in Q1 2025. On an adjusted basis, Exxon earned $1.16 per share, beating the consensus estimate. Revenue came in at $85.14 billion, also above the $82.18 billion Wall Street expected.

Chevron reported a Q1 profit of $2.2 billion ($1.11 per share), down from $3.5 billion ($2.00 per share) a year earlier. Adjusted earnings per share of $1.41 was a significant beat against the $0.95 consensus estimate, the company's largest EPS beat since October 2020. Revenue of $48.61 billion missed estimates of $52.1 billion.

Exxon shares were up more than 1% in premarket trading, while Chevron gained roughly 2%, as investors focused on the adjusted earnings beats rather than the headline profit declines.

Exxon and Chevron Q1 2026 Earnings: Why Profits Collapsed Despite High Oil Prices

Oil prices have surged roughly 57% since the US and Israel launched strikes on Iran on February 28, 2026. That should have been a massive tailwind for upstream producers. Instead, both companies booked multi-billion-dollar losses tied to financial hedging, derivatives contracts they had put in place to lock in prices before the war broke out.

Exxon reported a roughly $4 billion timing-effect loss on open hedges. These positions were unfavorable in Q1 because the value of hedged product shipments was not counted in the quarter, as physical deliveries were not yet complete. The company also absorbed a $700 million hit from closed hedges that were not offset by deliveries due to the Middle East supply disruption. Exxon stressed that these losses are temporary and the hedges will ultimately deliver a net profit in subsequent quarters once products are delivered.

Chevron booked a $2.9 billion charge related to financial hedges. Chevron CEO Mike Wirth told CNBC: "The global energy system continues to be under extreme stress," and said the world will face rising oil prices until the Strait of Hormuz is reopened.

Before the war began, oil prices were trading between $70 and $73 per barrel. The war triggered what is being described as the largest oil supply disruption in history, driving Brent crude to a 4-year high of $126.41 per barrel on Thursday before settling at $114.01. As of Friday morning, July Brent futures were up 0.9% at $111.42, while US West Texas Intermediate (WTI) futures gained 0.31% to $105.40.

Implications for Traders: Stocks, Futures, and the War Powers Deadline

Stock traders: The premarket gains in XOM (+1%) and CVX (+2%) reflect the market pricing past the one-time hedging losses toward adjusted earnings power. Both companies beat their adjusted EPS estimates, suggesting Wall Street had already discounted much of the hedge drag. XOM shares have risen roughly 30% year-to-date; CVX is up about 27%. The near-term question is whether hedging losses reverse into profits in Q2 and Q3, as Exxon has suggested.

Futures and oil traders: The War Powers Resolution's 60-day clock reached its formal deadline today. The Trump administration argued this morning that the April 7 ceasefire "terminated" hostilities, effectively freezing the clock and bypassing the need for Congressional authorization. Defense Secretary Pete Hegseth made the same argument before the House Armed Services Committee on Thursday, stating that "the 60-day clock pauses or stops in a ceasefire."

However, the Senate rejected another war powers resolution this week. Democratic senators including Tim Kaine and Elizabeth Warren argue the deadline has now lapsed. Iran's Revolutionary Guards have threatened "long and painful strikes" on US positions if Washington resumes attacks, according to Reuters citing Iranian state media.

The Strait of Hormuz remains effectively closed. Goldman Sachs estimated this week that throughput has fallen to approximately 4% of pre-conflict levels.

Energy sector broadly: With the blockade likely to persist in the near term, energy sector earnings in Q2 and Q3 are likely to look very different from Q1. Exxon's hedges have largely run off, meaning higher oil prices should translate more directly into profits going forward, assuming the conflict does not escalate further.

Potential Positives vs Negatives

Potential positives for oil and energy equities:

  • The one-time hedging drag is temporary. Exxon expects these positions to reverse into net profits once deliveries are completed in subsequent quarters.
  • Both companies beat adjusted EPS estimates meaningfully, suggesting the underlying business is performing well under the supply shock conditions.
  • A negotiated nuclear deal and Hormuz reopening could deliver a significant near-term positive, lifting volumes and reducing supply-chain friction.
  • Rerouting supply around the Cape of Good Hope is increasing product margins on deliveries that do get through.

Potential negatives and risks:

  • If the ceasefire collapses and direct hostilities resume, a new wave of strike uncertainty could send oil prices back toward $126 or higher, adding further hedging complexity and delivery disruptions.
  • Hormuz throughput at 4% of normal is unsustainable for global supply chains and could feed a broader inflation spiral, eventually weighing on demand.
  • Congressional pressure over the War Powers deadline creates political uncertainty about the duration and scope of US involvement.
  • Chevron's top-line revenue miss of roughly $3.5 billion reflects real volume disruption and pricing friction that could persist.

What Could Happen From Here

Base case: The ceasefire holds, neither side resumes direct fire, and the White House's ceasefire argument satisfies the War Powers deadline. The Strait of Hormuz remains largely closed but begins slowly reopening under international pressure. Oil prices gradually ease from current levels toward the $90-100 range over the next 90 days. Q2 2026 earnings for Exxon and Chevron look materially better as hedging losses reverse into profits.
Confirmation signal: Nuclear deal progress, partial Hormuz reopening, easing of US blockade.

Upside case: A breakthrough in US-Iran nuclear talks leads to a formal agreement. The blockade is lifted, Hormuz reopens, and oil prices pull back sharply toward $80-85. While lower oil prices reduce upstream revenue, the end of the disruption allows both companies to book deferred deliveries and restore normal volume flows rapidly. Hedging losses fully reverse and energy sector stocks gap up on ceasefire relief.
Confirmation signal: Mutual announcement of nuclear agreement terms, formal ceasefire extension, Hormuz tanker traffic resumes.

Downside case: The ceasefire breaks down, CENTCOM launches the reported "short and powerful" wave of strikes, and Iran carries out its threatened retaliation against US positions. Oil spikes above $126, potentially testing $140. Hedging losses deepen for producers whose book is still exposed; downstream refining margins compress as crude costs spike again. Volatility surges across equities, rates, and commodities.
Confirmation signal: New strike reports from the Strait of Hormuz, explosions near US military positions, Brent breaking and holding above $120.

What to Watch Next

  • White House statement on War Powers deadline: The formal administration response to today's 60-day expiry will set the legal and market narrative for the next phase of the conflict. Watch for any Congressional counter-moves.
  • Iran Supreme Leader and IRGC statements: After today's deadline, any escalatory rhetoric from Tehran carries higher market weight.
  • Brent crude price action: A sustained break above $115 or below $108 in the next 24-48 hours will likely signal the next directional move for energy equities.
  • WTI contract roll: With the June WTI contract expiring soon, roll positioning in the July contract is worth monitoring for backwardation or contango signals about the market's duration view on the disruption.
  • Hormuz throughput data: Any credible report of tanker movements increasing through the Strait would be an immediate market-moving catalyst for oil prices.
  • XOM and CVX conference calls: Listen for management guidance on hedging book status and Q2 delivery expectations, which will frame the earnings recovery timeline.

Sources

CNBC - Exxon Mobil and Chevron Q1 2026 earnings | CNBC - Oil rises as White House says Iran ceasefire halts 60-day war deadline | BusinessWire - ExxonMobil Q1 2026 results | BusinessWire - Chevron Q1 2026 results

FAQ: Key Questions from Traders

Q: Why are XOM and CVX rising in premarket if profits fell so sharply?
Wall Street was already pricing in the hedging losses. Both companies beat their adjusted EPS estimates, which strips out one-time items. The market is forward-looking and expects hedging drag to reverse in Q2 and Q3 as deferred deliveries are completed.

Q: What happens to oil prices if the War Powers deadline is ignored or contested?
Prolonged legal uncertainty about the war's authorization creates risk in both directions. If Congress forces a troop withdrawal, it could trigger a ceasefire breakthrough or, conversely, an abrupt escalation that sends oil sharply higher. Most traders are watching for any signal from the Strait of Hormuz about actual shipping conditions.

For context on the broader oil market trajectory, see our earlier coverage: Oil Risk Watch: Iran Blockade Persists as UAE Exits OPEC and Brent Oil at $126: Iran Blockade and the Critical Phase for Markets.

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Header image source: wikimedia by W.carter. License: CC0.