U.S.-Iran Conflict Drives Oil Above $100, Boosts Major Energy Profits

A six-month military conflict between the United States and Iran has severely disrupted global oil shipments, particularly through the Strait of Hormuz, a narrow maritime passage that typically carries approximately one-fifth of the world's oil and liquefied natural gas supply. The disruption has triggered a sharp rise in crude prices, with Brent crude climbing from around $70 to above $100 per barrel during much of March through May, and at one point reaching $126 per barrel. American benchmark crude has similarly surged, ranging from $68 to $115 per barrel during the second quarter of 2026.

The elevated prices have generated substantial profits for major integrated oil companies that both extract and refine petroleum. Exxon Mobil reported second-quarter 2026 net income of $14.53 billion, up 105 percent year-over-year, with revenues reaching $116.02 billion, a 42 percent increase. Chevron posted net income of $12.07 billion, up 385 percent annually, with revenues of $70.06 billion, up 56 percent. Six major European oil companies collectively reported first-quarter profits of $22 billion, representing a 43 percent increase compared to the same period the previous year. Analysts attribute these gains to both higher crude prices and elevated refining margins (crack spreads) driven by increased demand for diesel, gasoline, and jet fuel.

Consumers worldwide have borne the brunt of these price increases. In the United States, average regular gasoline prices reached approximately $4.10 per gallon, roughly $1 higher than the same period the previous year, and up 37 percent since the conflict began in late February. Fuel shortages and rationing have affected multiple countries, including sporadic fuel rationing in Australia and government office closures in Nepal and Sri Lanka due to energy constraints. The supply disruptions have also altered procurement patterns: Indian Oil Corporation, the region's largest buyer, shifted to record levels of spot market crude purchases during the April-June quarter, abandoning established long-term procurement strategies.

In response to elevated fuel costs, U.S. Democratic lawmakers have introduced legislative proposals to impose windfall profits taxes on major oil producers. Senator Sheldon Whitehouse of Rhode Island and Representative Ro Khanna of California introduced bills in March that would amend the U.S. tax code to impose a per-barrel excise tax on companies producing or importing at least 300,000 barrels of oil per day in 2025. The proposed tax would equal 50 percent of the difference between the oil price at the time of assessment and the average price per barrel in the previous year, with proceeds to be redistributed to consumers. Similar proposals have failed to pass in previous congressional sessions.

Stock markets have reacted volatility to developments in the conflict. When Iran launched a missile attack and President Donald Trump vowed retaliation on Wednesday, global oil prices surged an additional 7-8 percent, crossing above $90 per barrel. U.S. stock indexes plummeted the same day: the Dow Jones Industrial Average fell 1,153 points (2.1 percent), marking its worst day since April 2025, while the S&P 500 declined 1.5 percent and the Nasdaq dropped 1.7 percent. Oil price volatility has persisted throughout the conflict, with brief periods of relief occurring when temporary peace agreements were announced, followed by renewed price spikes when large-scale fighting resumed.

The conflict has created uneven economic effects across the energy sector. While large integrated oil companies with refining capacity have profited substantially, some Middle Eastern oil producers have experienced revenue declines due to export disruptions and increased security and transportation costs. The sustained elevated oil prices have also contributed to broader inflation, with the Federal Reserve noting in June that energy supply shocks have driven increases in certain sectors. Fed Chair Kevin Warsh has stated that persistently high energy prices represent a burden for consumers as the central bank works toward its 2 percent inflation target.