Iran Conflict Boosts Chevron's Earnings Potential
Chevron is poised to benefit from the ongoing tensions in Iran and the resulting higher oil prices. The company's Project Kilby, a 20-year take-or-pay power supply agreement with Microsoft, positions Chevron to monetize Permian Basin natural gas by supplying dedicated power to a large AI data center.
The war with Iran is expected to continue for some time, potentially lasting into next year. As a result, Chevron could earn up to $15 per share in FY26, making it an attractive investment opportunity.
Refiners have led the first phase of the energy bull market driven by the conflict with Iran, but large oil producers like Chevron are expected to benefit more fully in Phase II. The company's strong balance sheet, free-cash-flow generation, and 3.41% yield make it a compelling choice for investors.
Chevron is also a beneficiary of global strategic reserves falling to critical levels, which has driven up commodity prices for oil, gasoline, diesel, and chemicals. This trend is expected to continue as the conflict with Iran persists.