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At the end of 2025 oil and gas companies were staring down the barrel of declining energy prices and resulting pressure on profits and returns to shareholders.
Despite the fragile ceasefire deal recently brokered by Pakistan, the conflict in Iran has shifted the calculus significantly since the end of February and helped global energy firms to reach all-time highs in share price terms.
What’s next for the sector and what can we learn from the most recent energy shock – resulting from the Russian invasion of Ukraine in 2022?
What the oil price increase means?
Oil prices have certainly enjoyed a surge comparable with the one we saw four years ago. Predicting the exact trajectory of oil prices is usually a fool’s errand but, the benefit to oil companies from the increase we have already seen is likely to be substantial. In 2025 BP indicated that a movement of $1 per barrel up or down in Brent crude would have a $340 million impact on annual profit (measured as pre-tax replacement cost profit). Since US-Israeli strikes on Iran commenced, Brent crude has traded as much as $50 per barrel higher than its pre-war levels.
In the UK the big integrated oil and gas firms are BP and Shell. Counterparts in the US include Chevron, ConocoPhillips and ExxonMobil while the European contingent takes in France’s TotalEnergies, Italy’s ENI and Norway’s Equinor.
Integrated oil and gas companies participate in every aspect of the oil and gas business – across the three core areas of upstream, midstream and downstream. Upstream refers to exploration for and production of oil and gas; midstream refers to the pipelines and other infrastructure which transport these hydrocarbons and downstream refers to the refining of crude oil and the marketing and distribution of refined products such as petrol and jet fuel. In addition to its oil interests Shell is notable for being a leader in liquefied natural gas or LNG for short.
Small and medium-sized names in the sector typically focus on upstream activities or in other words exploration and production. Unlike their larger counterparts their fortunes are often tied to just one or two projects rather than a large, diversified portfolio of developments.
Oil and gas companies’ exposure to Middle East
Most large global oil and gas companies have operations in the Middle East which are affected by the attacks and disruption on regional infrastructure and shipping. Shell’s Pearl plant and Saudi Arabia’s SAMREF refinery were reported damaged, while TotalEnergies said 15% of production is offline.
Based on information from Reuters here are the details of who produces what from the Middle East:
BP
BP’s oil and gas production in the Middle East in 2025 totalled around 503,000 barrels of oil equivalent per day (boepd), accounting for 22% of BP’s overall output. The company does not operate any refineries in the Middle East.
Chevron
Chevron, with minimal Middle Eastern production, generated 165,000 barrels of oil equivalent per day in 2025 from Israel and the Saudi Arabia-Kuwait partitioned zone, out of a total group output of 3.7 million boepd. It has no refineries in the Middle East.
ConocoPhillips
ConocoPhillips produced 147,000 barrels of oil equivalent per day from its non-operated projects in Qatar and Libya last year, accounting for 6% of global output.
Eni
Eni’s produced about 379,000 boepd in the Middle East, accounting for 22% of its total output in 2024, based on Reuters analysis of company data. Eni also owns a minority share in ADNOC Refining, which runs the Ruwais refinery in the UAE.
Exxon
Exxon’s partnership in the Upper Zakum oilfield, located offshore in the United Arab Emirates, involves a capacity of one million barrels per day. Following an agreement with QatarEnergy in 2022 for further development of the North Field East, Exxon increased its share of Qatar’s liquefied natural gas volumes to 60 million tons per year.
While Exxon does not disclose production figures by country, analysts estimate that approximately 20% of the company’s total oil and gas output originates from the Middle East. The region also accounts for about 5% of Exxon’s global refining capacity, including a 50% stake in a joint venture operating Saudi Arabia’s 400,000 barrels per day SAMREF refinery.
Shell
Shell’s oil and gas production in the Middle East – excluding Qatar but including Egypt – was approximately 307,000 boepd in 2025. This represented about 11% of its total output, according to Reuters calculations based on Shell’s latest annual report.
In Qatar, Shell owns a 30% stake in an LNG facility with an annual capacity of 7.8 million metric tons. Additionally, Shell holds full ownership of Pearl GTL in Qatar, which can process up to 1.6 billion cubic feet of wellhead gas per day and convert it into 140,000 barrels per day of gas-to-liquids.
In Oman, Shell has a 30% interest in an LNG plant with a yearly capacity of 7.1 million metric tons, as well as an 11% stake in another LNG facility with a capacity of 3.7 million metric tons per year.
Shell does not operate any refineries in the Middle East.
TotalEnergies
TotalEnergies’ oil and gas output in the Middle East, including Egypt, was around 348,000 boepd, or around 34% of its global output, according to calculations based on its 2024 annual report. TotalEnergies also holds stakes in refineries and petrochemicals plants in Saudi Arabia and Qatar.
What happened to energy prices and stocks in 2022?
As the chart shows, Brent crude oil and European natural gas prices surged in 2022 in response to Russia’s invasion of Ukraine in a similar manner to that which we have seen in the wake of the Iran war. Albeit European gas prices saw even larger moves and greater volatility four years ago than they have today.
Gas is predominately utilised in power generation; oil is instead largely refined into transportation fuel.
Gas is also literally a less liquid market than oil and, as a result, is also more localised. Much natural gas is still transported through pipelines and although technologies like LNG, gas-to-liquids and compressed natural gas have made a difference, it is still more expensive and complicated to transport gas than oil.
After three months of the Ukrainian conflict, most big oil and gas firms were trading materially higher. However, two months later some of those gains had been wiped out as investors reacted to a decline in oil prices. This slump in oil came as investors weighed the risks to demand from a global recession.
Since late February 2026, that same collection of stocks has enjoyed strong gains. Norway’s Equinor, a significant supplier of natural gas to Europe, has been the best performer. Unlike a lot of its counterparts the company has no footprint in the Middle East so has not been affected by the disruption to energy infrastructure and reserves in the region.
BP and Shell are scheduled to report their first-quarter results on 28 April and 7 May respectively and will be expected to give some indication of the effect higher commodity prices will have on their financial performance.
With the improved commodity price backdrop and continued progress on reshaping and streamlining the business the stars are aligning for incoming BP CEO Meg O’Neill as she prepares to start next month. Shareholders will be looking for guidance on how she plans to build on this improvement in its prospects. The table shows the extent to which BP and Shell’s consensus earnings estimates for 2026 have been upgraded since the beginning of March.
Companies may be reluctant to increase their ordinary dividends and instead may look to use special one-off dividends and share buybacks to pass on the benefit of higher prices in the knowledge that a subsequent move lower in oil and gas may make sustaining higher dividends on an ongoing business problematic.
Other risks for investors in the sector to consider in the current environment include the potential for extra regulation, windfall taxes and potentially resource nationalism (states clawing back interests in their reserves of oil and gas) in a world where countries need to prioritise energy security and seek to shield their populations from the impact of higher energy prices
How to get diversified exposure to the oil and gas sector
It is possible to buy trackers and actively managed funds which hold a basket of oil and gas companies. The table shows the performance of the largest trackers in this category and the small list of UK funds which pick their own stocks in the energy sector.
The heavy weighting of BP and Shell in the FTSE 100 index means anyone with a standard UK tracker has meaningful exposure to the energy sector already. In the FTSE 100 the weighting is around 10% compared with roughly 4% for the MSCI World, for example.
Tom Sieber: Content Editor
Tom Sieber is AJ Bell's Content Editor. He was previously the Editor of Shares Magazine. He has been with the business since 2012.
Tom is a regular contributor to the AJ Bell Money & Markets...
