The immense dislocations wrought on markets by war in Iran have created opportunities for energy companies, and some are faring better than others. With transit through the Strait of Hormuz still highly unreliable, three qualities are proving particularly valuable, and they play to the strengths of Europe's unloved oil majors.
First is refining capacity. Companies that are big in both drilling and refining were long out of fashion, as it was hard to compete with newer, cheaper refineries in the Middle East and Asia. But disruption in the Gulf has severely dented supply of refined fuels: supply has halved since before the war, according to analytics platform Kpler. Refined products now trade at much higher prices than crude, a spread that is a windfall for those that can handle the transformation themselves. Exxon Mobil remains big on refining, processing almost as many barrels as it produces. European majors are also well placed: Shell and BP have sizeable refining businesses, and Spain's Repsol refines over 80 per cent more barrels than it produces.
The second advantage is a trading business. The Iran crisis has snarled usually free-flowing energy markets, with oil and gas prices varying sharply by place and time. That favours companies with global portfolios of fields, pipelines, storage terminals, refineries, ships and commercial contacts, which tend to be in Europe. At Shell, BP and Total Energies, trading accounted for 15-20 per cent of 2025 earnings in aggregate, according to Goldman Sachs.
Finally, proximity to the most imbalanced supply-demand market helps. European spot gas prices have risen far beyond those in the US, and European majors are more exposed to that market. Norway's Equinor expects its fields to sell gas in the third quarter at a price roughly 50 per cent higher than in the first three months of the year. American majors still have better growth prospects and a more supportive investor base, but Europe's oil companies still trade at a discount to US peers. In normal times, prizing US firms more highly was rational. Those normal times are probably not coming back.
Source: Financial Times Companies · Summarized by HeadlinesBriefing