Iran War Disrupts Oil Production, Hits Big Oil Profits Despite Price Surge

The ongoing Iran war has disrupted oil and gas production in the region, causing losses for major energy companies even as prices soar. Exxon Mobil Corp. and Chevron Corp. lost around 6% of their global production in the first quarter due to shipping blockades and hedging losses. Shell Plc's gas output was down by 5%, largely due to the closure of the Strait of Hormuz.

The Strait, a critical waterway for oil exports, has been closed since fighting began in the region just one month ago. If it remains shut for an extended period, the impact on production could be severe. 'The Middle East makes a messy quarter,' said Lloyd Byrne, an analyst at Jefferies Financial Group Inc.

Exxon and Chevron's shares reached record highs in recent weeks as Brent crude prices surged above $112 per barrel, but production losses and shipping constraints prevented them from fully benefiting from the price spike. The companies have reported combined mark-to-market derivative losses of around $7 billion this week due to hedges associated with cargoes that will take several weeks to be delivered.

'This accounting often happens well before the sale of the associated physical product is complete,' said Exxon's Chief Financial Officer Neil Hansen in a statement. 'These impacts will unwind over time.'