The meter’s still running
Higher crude oil prices as a result of the Iran war are likely to give a major boost to second-quarter 2026 earnings for integrated oil and gas companies. Continued industry growth, however, requires not just high prices but the ability to set a long-term course. The war directly undermines any prospects of the market stability needed to do this.
Disruptions tied to the closure of the Strait of Hormuz have not just removed large volumes of crude oil, LNG, refined products, LPG, and fertilizer from global markets, they have increased both insurance costs and freight rates. These forces combined are raising commodity prices and placing the global economy as a whole under mounting threat of renewed inflation and a subsequent slowdown. Neither the oil and gas industry nor its investors should mistake windfall profits stemming from increased price volatility for prosperity.
Publicly traded US independents have spent the past several years prioritizing spending discipline and predictable returns over chasing boom-and-bust cycles. Investors have rewarded them and been rewarded in return. So far, almost all parties have held the line on this behavior. But extreme geopolitical instability of the sort created by the war undermines the environment needed to continue doing so.
Refiners, petrochemical firms, airlines, manufacturers, and consumers all face cost pressures, which ultimately weaken economic growth and energy demand. Higher fuel prices ripple through the economy, increasing transportation and manufacturing costs while reducing discretionary consumer spending. A weakened economy will eventually harm the oil and gas industry via demand destruction. This would be the case to some degree even in a vacuum, but given the presence of alternative energies in record-breaking volumes, the risk of permanent damage to the industry is real.
A record-breaking 814 Gw of solar and wind power was added globally in 2025, according to Ember, with April 2026 production from the two yielding 22% of the world's electricity compared with 20% from natural gas. It was the first time solar and wind had generated more electrons than gas.
US energy exports are also at record levels, as foreign buyers scramble to replace supplies that normally would come from the Persian Gulf. Crude oil exports averaged an all-time high of 5.2 million b/d in April, up from 3.89 million b/d in February, according to Kpler data, with the country becoming a net crude exporter for the first time since World War II.
Efforts to meet as much of this demand as possible have been a boon to the US industry. But ultimately, American LNG exporters depend on stable global trade routes, reliable shipping economics, and healthy international demand growth to make the kind of business decisions needed for capital projects the scale of a greenfield LNG plant. A prolonged war threatens all three.
While these decisions become more perilous, the case for decentralized forms of energy with short distribution chains—solar, wind, geothermal, and grid-scale batteries right now; small modular reactors and hydrogen in the future—becomes ever stronger. And this is where the real danger lies. Not in a transitory price spike, no matter how severe; but in accelerating the realization that we don’t have to live with these sorts of events at all.
Oil and gas prices will come down again, returning these goods to their position as price-point leaders of the energy pool. But each of these cycles cuts into baseline demand while the cost of alternatives keeps dropping as well. Eventually enough demand will have been eroded that oil and gas’s price will become secondary to its other attributes.
This war has been an own-goal of extraordinary proportions, scored by the man the industry expected to create the environment needed for it to reach even further greatness.
It’s time to bring it to an end.