BP gains on Exxon to emerge as top big-oil stock during Iran war

[LONDON] BP, long the laggard among oil supermajors, is emerging as the sector’s top stock during the Iran war.

This is as it reaps “exceptional” trading profits and avoids the scale of production outages, which is hurting rivals such as ExxonMobil.

The windfall comes at a crucial time for the London-based company and its new CEO, Meg O’Neill, its fourth leader in six years.

Its shares are the sector’s worst-performing since a 2020 strategy to invest heavily in low-carbon energy projects and phase out fossil fuels failed to pay off, causing its debt to spiral. 

Exxon, the standout energy performer of the last six years, is being hit the hardest by the crisis.

About a fifth of its global production, mainly from Qatar and the United Arab Emirates, is trapped behind the Strait of Hormuz.

Meanwhile, a massive liquefied natural gas complex – which Exxon holds a stake in – was damaged by Iranian missiles and could take years to repair. 

While crude prices have surged more than 45 per cent to above US$100 a barrel during the eight-week conflict, the shares of big-oil companies have failed to keep pace. That is because oil futures show a steep decline in the coming months, as investors expect the strait to eventually reopen. 

BP shares have been up about 20 per cent since the war began on Feb 28, while those of Exxon have declined about 2 per cent.

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BP will report its earnings on Tuesday (Apr 28), followed by French major TotalEnergies on Wednesday, with Exxon and Chevron on Friday. Shell will report its earnings on May 7. 

Performing better than its peers

Higher oil and gas prices caused by the war have benefited the supermajor oil companies, but the gains are uneven.

Exxon has about five times as much production affected by the war in the Persian Gulf as Chevron, investment bank Raymond James said.

Europe’s majors have much larger trading divisions than their US rivals, giving them greater scope to benefit from the price volatility caused by the war. 

BP’s stock has performed better than its peers in part because it was cheaper to begin with – meaning it had more to gain from US$100-a-barrel crude relative to its rivals.

Following the company’s suspension of its share buyback scheme earlier in 2026, analysts expect it to use the cash infusion to pay down debt more aggressively. This will give BP more financial flexibility to grow oil and gas exploration and production in the future. 

It noted in a filing in April that it expected its trading results to be “exceptional”, while Shell and Total have also indicated elevated profits.

By contrast Exxon and Chevron are more risk-averse when it comes to trading, typically using derivatives to mitigate price volatility once cargoes have been shipped. 

That strategy means the two US companies will take mark-to-market losses of nearly US$7 billion in the first quarter.

However, they expect these so-called “timing effects” to fully unwind in the coming quarters once their customers receive the cargoes. 

James West, an energy analyst at Melius Research, said: “You have a market that’s undersupplied with crude, and so normalised prices will be higher for longer.”

While this should benefit the sector in the long term, differences between the stocks will exist in the short term, he noted. “Exxon has some production stuck in the strait, while BP benefits from a new CEO and the chance that there could be a turnaround story.”

Rebuilding the balance sheet

BP’s new strategy to focus on fossil fuels once again is gathering momentum.

The company won the approval of US President Donald Trump’s administration in March for its first Gulf of Mexico project since the deadly 2010 Deepwater Horizon disaster.

It also bought stakes in offshore blocks in Namibia, as it expanded into one of the world’s top exploration hot spots.

O’Neill, who spent two decades of her career at Exxon, is expected to prioritise rebuilding BP’s balance sheet over reinstituting share buybacks.  

RBC Capital Markets lead global integrated-energy analyst Biraj Borkhataria wrote in a note: “The best strategy in the current environment is to simply pass through all additional cash flow in the current environment to debt reduction, rather than seek to restart the buyback later this year.”

Jason Gabelman, an analyst at TD Cowen, the financial-services division of investment bank TD Securities, said that Chevron may increase its buyback 25 per cent to US$3.8 billion this quarter ahead of further hikes later in 2026.

The company has flagged production outages totalling as much as 6 per cent in Q1, though much of that was from a fire at its giant Tengiz operation in Kazakhstan that was unrelated to the war. 

Exxon is expected to maintain its US$5 billion-a-quarter share buyback, the highest in the group.

The Texas oil giant may have the most exposure to the Middle East, but it also has a greater ability to offset losses with oil and gas growth in the Permian Basin and Guyana, as well as other businesses such as petrochemicals and helium.

Joshua Stone, UBS head of European energy equity research, said that O’Neill will need to demonstrate similar resilience if BP is to maintain its outperformance in the longer term.

“A higher-for-longer price environment is undoubtedly positive” for BP, he wrote in a note. “But there is still work (needed) to regain investor confidence.” BLOOMBERG