Who benefits from high oil prices? Oil at $100 per barrel is painful for consumers and economies as a whole. However, for energy companies, oil touching $100 spells a bonanza. Share prices of the world’s biggest energy companies have rallied since war broke out on February 28. European energy stocks, including BP, Shell, TotalEnergies and Eni, have surged by double digits, boosted also by high gas prices. US energy companies Chevron and Exxon has also risen by nearly 7 per cent over the last few weeks. However, this surge comes with risks. The same conflict driving prices up is also disrupting operations. BP and Exxon have significant assets in the Gulf, and Shell has already declared force majeure on liquefied natural gas cargoes from Qatar, which accounts for a fifth of the world’s supply. These companies are both benefiting from the crisis and exposed to it at the same time.
The stakes are high for consumers. Energy companies have a long history of profiting from conflict-induced price swings. When Russia invaded Ukraine, and oil touched $120, the world's five biggest energy companies made nearly $200 billion in profit in a single year.
Governments across Europe called for windfall taxes, arguing the gains were built on crisis rather than competition. The majority of those profits went to shareholders in dividends and buybacks, rather than towards new supply that would keep prices low.
Now, with consumers from Asia to Europe feeling the squeeze again, will history repeat itself?
Beyond oil: Sectors impacted by war
The Hormuz blockade is hitting sectors far beyond energy. Gulf countries account for about 8 per cent of global primary aluminium production, and the disruption is already forcing cuts. Bahrain's Alba has initiated a controlled shutdown of 19 per cent of its production capacity, halting lines 1 to 3 to manage supply volatility. Aluminium prices also touched $3,544 a tonne, the highest since March 2022. Analysts at CRU Group warn prices could push towards $4,000 per tonne if the disruption persists.
Fertilisers are another pressure point. About 30 to 35 per cent of global nitrogen fertilisers transit the Strait of Hormuz, along with 40 to 45 per cent of sulphur-based exports from the Gulf. Urea prices have already climbed roughly 25 per cent since the war began, reaching around $591 per tonne. With farmers facing higher oil and fertiliser costs simultaneously, global food prices are expected to rise around 2 per cent this year, more than double their pre-war forecast.
Then there is helium, a less visible but critical casualty. Qatar accounts for roughly one-third of the global helium supply as the rare gas is concentrated with gas deposits. The market is currently short an estimated 5.2 million cubic metres per month. Spot prices have surged 70 to 100 per cent, with analysts warning that only around half of lost Qatari volumes can be replaced from alternative sources. The industries most exposed, semiconductors, MRI manufacturing and fibre optics, have no practical substitute for it.
Bottom line: What started as an energy crisis is rapidly becoming a broader economic one. Higher aluminium costs feed through to construction and automotive supply chains. Fertiliser shortages threaten food security across Asia and Africa. A helium shortage puts pressure on semiconductor manufacturing. And with the Strait cutting off supply chains for the critical minerals that power everything from AI chips to defence systems, the war impact runs far deeper than the price of just oil.
Iraq and a hard place
Caught between an Iran it cannot afford to antagonise and a US it depends on financially, Baghdad is scrambling for options on every front. Iraq produced about 4.35 million bpd before the war. Output has since been slashed to around 1.4 million bpd, enough only for domestic refineries, while exports from its southern Basra terminals have ground to a halt. Fitch estimates each week of closure costs around 0.4 per cent of GDP in lost export proceeds.
Baghdad has struck a last-minute deal with the Kurdistan Regional Government, setting aside a long-running dispute, to pump 250,000 bpd through the Kirkuk-Ceyhan pipeline, which has been dormant for over a decade, and export from Turkey's Mediterranean coast. It is also in direct talks with Tehran to secure safe passage for its tankers through Hormuz, while exploring overland routes through Syria and Jordan.
Bottom line: Iraq may be the war's most squeezed bystander. It sits on some of the world's largest oil reserves at a moment when prices are surging, yet it cannot sell a barrel through its main export route. With 90 per cent of government revenue dependent on oil, monthly export receipts of $6 billion are now lost to war.
Big number
$200bn
What the world's five biggest energy companies made in profit in a single year after Russia invaded Ukraine
Jargon buster: Windfall tax
A one-off government levy on companies that make unexpectedly large profits from events outside their control, like a war driving up oil prices.
Happening this week
- CERAWeek by S&P Global, Houston: March 23-27
- FII Miami: March 25-27
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