Oil Majors Face Spending Test From Iran War Windfall Cash

3-line summary

• Reuters reports that oil majors' third-quarter earnings are set to jump sharply after the US-Israel war with Iran disrupted the Strait of Hormuz and pushed energy prices to multi-year highs, boosting refining and trading profits; Shell expects refining margins to roughly triple or quadruple year-on-year with a record $42-a-barrel margin, TotalEnergies expects refining and chemicals cash flow to roughly double quarter-on-quarter to about $4 billion, Exxon says downstream profit could rise $4.5 billion from the prior quarter, and BP's underlying profit could top $7 billion according to TPH, up from $5.7 billion in Q2.
• Investors are watching closely how the windfall cash is deployed, given the industry's history of boom-bust spending cycles; Chevron and Exxon have so far used cash to pay down debt, with Chevron's Venezuela investments and a potential extension of its Kazakhstan TCO joint venture in focus, while Shell's buyback program-cut to $3 billion per quarter this year-could see a top-up of about $3 billion in Q4 per HSBC.
• BP has paused buybacks this year and hit its net-debt-reduction target about a year early, with its net-debt-to-operating-cash-flow ratio seen falling from 1.7x at the end of 2025 to about 0.8x in Q3; HSBC expects BP to prioritize balance-sheet strength and sees no buyback resumption before 2028, with a capital-allocation strategy update due December 15. Shell and TotalEnergies report Q3 results October 29, with BP, Chevron, and Exxon reporting October 30.

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