The Price of War: Energy Firms’ Gulf Conundrum

The war in Iran has brought a windfall for US energy companies, but their investments in the region remain at risk. As Brent crude prices soar due to the ongoing disruption to global oil supplies, these firms are reaping massive profits. Chevron and ExxonMobil have reported record-breaking quarterly earnings, while Occidental Petroleum has become one of the largest foreign producers in Oman.

However, this lucrative situation masks a more complex reality: the war’s devastating impact on energy infrastructure in the Gulf. Six months into the conflict, the Strait of Hormuz remains largely closed to commercial traffic, with Iran and Oman agreeing on a temporary maritime route that leaves long-term security arrangements unresolved. The closure has pushed up energy prices worldwide, creating windfalls for producers like Chevron and ExxonMobil.

But this boon comes at a steep cost: prolonged disruption is likely to delay major projects and weigh on the future growth plans of US oil and gas companies with a presence in the region. According to Rahul Choudhary from Rystad Energy, “US companies’ share of gas supplies [from the region] will fall by around 40 percent this year compared to last year, and the share of oil supplies will drop by 30-35 percent.” This reduction in supply has already begun to affect major players like ExxonMobil, with Choudhary noting a $1.3 billion drop in upstream earnings due to lower volumes from the Middle East.

ExxonMobil’s experience highlights a broader issue: the industry’s uneasy balance between wartime gains and mounting geopolitical vulnerability. Despite its long-standing partnerships with QatarEnergy and ADNOC, the company’s operations in Qatar and the UAE are vulnerable to disruption caused by recent attacks on energy facilities. In contrast, Chevron has limited exposure to Arab Gulf supply disruptions, with the region accounting for just 5 percent of its total global output.

The divide between these companies underscores a critical challenge: US energy firms have carved out strategic positions across the Gulf through stakes in production assets, joint ventures, and long-term contracts. However, this presence also makes them vulnerable to disruption caused by regional conflicts. Attacks on energy facilities have become a disturbingly common occurrence in the region, with at least 172 attacks carried out by Iran and Iran-backed groups against nonmilitary infrastructure across GCC countries since the war began.

Energy infrastructure has borne the brunt of these strikes, with oil and gas facilities accounting for nearly half of all targets. The UAE, Kuwait, and Bahrain have suffered the highest number of successful strikes, with most aimed at oil and gas facilities. Among the sites targeted are major US interests like ExxonMobil’s operations in Qatar and Occidental Petroleum’s Mukhaizna heavy oilfield in Oman.

As the war in Iran continues to disrupt global energy supplies, it is essential for policymakers and investors to assess the risks and rewards of US energy firms’ Gulf investments. While the conflict may fuel short-term profits, its long-term consequences threaten the stability of these companies’ regional assets and future projects. The prolonged uncertainty also raises concerns about the industry’s long-term prospects: if US energy firms continue to invest heavily in the Gulf despite rising risks, will they be prepared for the consequences of another conflict or a significant shift in regional politics?

The war in Iran has exposed the intricate web of economic and strategic interests that binds global energy markets. As we navigate this complex landscape, one thing remains constant: the price of stability in a region increasingly prone to conflict and upheaval will only continue to rise.