Oil majors weigh shareholder returns as Iran war boosts cash flow

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Oil majors weigh shareholder returns

Highlights

ExxonMobil, Shell, Chevron, TotalEnergies and BP report over $75bn in adjusted profits for H1, up 75% from $43bn in H1 2025, with free cash flow nearly doubling amid the U.S.-Iran war.
Energy majors increase shareholder returns and debt reduction, as BP targets $9bn–$10bn in liability cuts in Q3 and TotalEnergies commits to annual dividend hikes until 2030.
Pressure builds for reinvestment and M&A, but dealmaking may require crude prices to retreat from current levels above $100 a barrel to the $70s before accelerating.

Cash deployment plans under market uncertainty

As reported by Financial Times, ExxonMobil, Shell, Chevron, TotalEnergies and BP collectively earn more than $75bn in adjusted profits in the first half of the year, up 75 per cent from $43bn in the same period of 2025, while their free cash flow nearly doubles.

The gains come as the U.S. war with Iran continues to disrupt energy markets. Crude prices are on average about a third higher year-to-date, European gas prices have jumped 155 per cent since the conflict began in February, diesel prices have almost doubled and trading operations are posting strong returns.

Executives are avoiding commitments to major new spending because of uncertainty over how long the war lasts and whether energy prices stay elevated. Martijn Rats, head of European oil and gas research at Morgan Stanley, says companies are stressing capital discipline rather than repeating the heavy spending seen in earlier upcycles, adding that the conflict’s duration of just over seven months remains short against the sector’s planning horizon.

BP says it will use its windfall to cut debts and other liabilities by $9bn to $10bn in the third quarter, moving ahead of its targets. Chief executive Meg O’Neill says repairing the balance sheet remains the priority and that the company should not increase spending simply because headline prices are high.

TotalEnergies last month pledges to raise dividends every year until 2030 and buy back more shares, while chief executive Patrick Pouyanné says there is room for high returns to shareholders. Chevron chief executive Mike Wirth also says any windfall belongs to shareholders over time, and the company plans to stay disciplined on spending even as it expects capital expenditure of $18bn to $19bn this year, up from just over $17bn last year and $16bn in 2024.

Pressure builds for reinvestment and deals

After balance sheets improve and shareholder distributions rise, the majors are likely to face pressure to direct more cash into replenishing oil and gas reserves. Companies are expected to favor projects with quicker paybacks, including developments near existing platforms and pipelines, rather than frontier exploration that takes longer and costs more to bring onstream.

Russell Hardy, chief executive of oil trader Vitol, says more capital is likely to move into short-term opportunities because stock markets show limited enthusiasm for projects that may not produce until well into the next decade. That stance reflects a broader industry push to bring new supply to market faster.

The cash surge could also revive merger and acquisition activity, especially in the U.S., where the sector has a history of consolidation. Micah Smith, co-leader of the oil and gas practice at McKinsey, says excess cash ultimately pushes companies toward dealmaking, but adds that crude prices likely need to fall back into the $70s from current levels above $100 a barrel and remain stable before takeover activity accelerates.

Refining could emerge as another destination for investment, particularly in Europe and the U.S., where the sector has long been out of favor and many majors have sold assets. Rats says trading and refining benefit from the same disruptions, a dynamic that has already helped traders such as Vitol and Trafigura acquire plants divested by international oil companies.

Our earlier report on crude prices falling despite heightened Middle East tensions explained how traders weighed shipping attacks near the Strait of Hormuz against signals that supply constraints could ease. It noted that even a sharp U.S. crude inventory draw failed to lift prices meaningfully, reflecting cautious sentiment as talk of easing sanctions on “shadow fleet” vessels and higher output helped cap risk-driven gains.

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