Exxon Mobil told investors that the recent spike in oil and gas prices driven by the U.S.-Israeli war on Iran may boost its first-quarter upstream earnings by up to $2.9 billion, a gain that could more than offset the impact of lost production tied to Middle East disruptions. The company detailed the impact in a regulatory filing released on Wednesday.
Exxon said higher benchmarks contributed materially to Q1 profit potential, while downstream results are expected to be meaningfully weaker in the quarter because of timing effects. The company estimated a downstream earnings decline of about $5.3 billion in the quarter, with part of that shortfall attributable to the way trades and shipments are accounted for during transit. Exxon said the downstream hit is temporary and will reverse in later quarters as cargo deliveries complete.
The conflict, which began on February 28, sent oil prices sharply higher, in some cases by as much as 65%, and prompted shutdowns at certain Middle East oil and gas fields after the Strait of Hormuz - a key route for roughly a fifth of global energy flows - was effectively closed. According to LSEG data cited by the company, benchmark Brent crude averaged $78.38 per barrel in the first quarter, a 24% increase versus the prior three months.
Even with the price uplift, Exxon said its first-quarter oil and gas volumes will be lower. The company expects production in Q1 to fall about 6% compared with the fourth quarter, when it produced 5 million barrels of oil equivalent per day. Assets located in Qatar and the United Arab Emirates accounted for roughly 20% of Exxons global oil production in 2025, the filing noted.
Timing is a central factor behind the downstream hit. Exxon quantified timing effects that could reduce downstream first-quarter earnings by $3.3 billion to $4.1 billion versus the fourth quarter. The company explained these results stem from accounting rules in its trading program and the gap between when products are hedged and when physical cargoes are delivered to customers, which can take weeks for shipments traveling between the United States and Asia.
Neil Hansen, Exxons chief financial officer, described the effect as an "unusually large, negative timing impact" that is temporary and driven by the accounting treatment of those trades. Hansen added: "These impacts will unwind over time and result in net positive profit once the underlying transactions are complete. These are sound trades and the profitability that will result from them will be material."
The company also said it will record an impairment in the first quarter of between $600 million and $800 million because supply disruptions prevented the physical shipment of cargoes that were tied to some hedges. Exxon plans to publish its full first-quarter financial results on May 1.
Investors often examine Exxons earnings snapshot, included in regulatory filings ahead of the full report, for clues about how market moves and operational disruptions may affect the broader oil sector when results are released. Exxons disclosures quantify both the price-related upside to upstream margins and the near-term, accounting-driven drag on downstream earnings, while flagging the production losses tied to the regional disruptions.