Shell more than doubles quarterly profits as Iran conflict lifts oil prices

Market impact

Shell plc reported a stronger-than-expected first quarter as the conflict with Iran and the near-closure of the Strait of Hormuz sent energy prices sharply higher. Adjusted income rose to $6.9 billion (€5.86 billion), up from $3.3 billion (€2.8 billion) in the prior quarter. The company said trading profits and elevated refining margins helped offset lower production caused by conflict-related disruptions.

Chief Executive Wael Sawan said Shells operational focus helped deliver strong results in a quarter marked by unprecedented disruption in global energy markets. Management also announced a 5% increase in the dividend and a $3 billion share buyback programme to be executed over the next three months.

Analysts pointed to two main drivers behind the profit surge. First, the Middle East conflict created a supply shock: Brent crude, which had been trading around $70 a barrel before hostilities, spiked to about $126 a barrel at its peak its highest level in more than four years. The volatility that followed produced trading opportunities for Shells marketing and trading arm, according to Dan Coatsworth, head of markets at AJ Bell. Second, stronger refining margins amplified the benefit of higher crude prices.

Brent futures for next-month delivery fell below $100 on Thursday morning amid hopes of a diplomatic breakthrough between the United States and Iran, a move analysts said underpinned a roughly 2% decline in Shell shares after the results. Market watchers noted the share weakness reflected broad hopes of a rapid reopening of the Strait of Hormuz rather than company-specific problems.

Outlook and operational impacts

Shell warned that conflict and weather-related events are hitting production. Around 20% of the groups oil and gas output originates in the Middle East, making the company vulnerable to sustained regional disruption. Shell signalled that gas production in Qatar is expected to fall by at least 30% in the second quarter compared with the first three months of 2026, though it said assets in Oman remain operational and upstream production overall has not been affected in some locations.

Operational setbacks this quarter included damage to a facility in Qatar during the conflict and cyclone-related stoppages at one of Shells liquefied natural gas sites in Australia. Maurizio Carulli, a global energy analyst at Quilter Cheviot, said the longer-term strategic challenge remains reserve replacement and production growth. He highlighted Shells recent acquisition of ARC Resources Ltd., a Canadian producer focused on the Montney shale basin, as a meaningful step to lift Shells production outlook from stagnation toward modest growth.

Policy backdrop and market reaction

Shells bumper results have renewed debate in the United Kingdom over a possible extension or strengthening of the windfall tax on energy earnings. Calls for tougher measures have surged as campaigners and critics point to record profits at major energy companies while consumers face higher fuel and energy bills. Friends of the Earth climate campaigner Danny Gross urged the UK government to consider strengthening the levy, arguing fossil fuel companies are pocketing monstrous profits.

At present, the UK windfall tax applies only to profits from oil and gas extraction in the UK, and the country accounts for under 5% of Shells global output. Dan Coatsworth warned the longer oil prices stay elevated, the louder calls for an expanded windfall tax will become. Market participants noted that, although Shells quarter beat expectations, the prospect of easing Strait of Hormuz disruptions and lower oil prices could weigh on the broader oil sector.

In summary, Shells first-quarter performance underlines how geopolitical shocks can rapidly reshape energy company earnings: elevated crude prices and trading gains drove materially higher profits even as production was curtailed in parts of the Middle East. The result has strengthened shareholder returns this quarter but also intensified political scrutiny and renewed questions about the companys longer-term production trajectory and reserve replacement strategy.