In the context of the Iran conflict entering its second month and geopolitical risks dominating the international oil market, the long-underperforming BP PLC (BP.US) has unexpectedly surpassed its supermajor peers to become the best-performing stock in the sector. Benefiting from "exceptionally strong" trading profits and relatively limited production disruptions, BP's share price has climbed approximately 20% since the conflict began on February 28. In contrast, Exxon Mobil (XOM.US), which had been the top performer over the past six years, has seen its shares decline about 2% over the same period.
The divergent performance marks a reversal for BP, whose shares had consistently lagged behind other supermajors since 2020, when its heavy bets on a low-carbon transition led to a significant increase in debt. The surge in oil prices triggered by the Middle East conflict—with Brent crude surpassing $100 per barrel, a gain of over 45%—has provided a crucial turning point for the company. Newly appointed CEO Meg O'Neill has become a focal point for market attention. Analysts note that BP's previously lower stock price base gives it greater relative leverage from $100-per-barrel oil. The company has already disclosed this month that it expects its trading business performance to be "exceptionally strong." Shell (SHEL.US) and TotalEnergies (TTE.US) have also signaled substantial profit improvements.
In comparison, Exxon Mobil's shares have fallen approximately 2% during the same timeframe. Data from Raymond James indicates that Exxon's production affected by the conflict in the Persian Gulf is about five times greater than that of Chevron (CVX.US), making it the hardest-hit major in the current crisis.
Exxon's challenges stem from two primary geopolitical factors. Firstly, a significant portion of its global output—approximately one-fifth, mainly from Qatar and the UAE—is trapped behind the Strait of Hormuz and cannot be shipped out. Secondly, a major liquefied natural gas (LNG) complex in which Exxon holds a stake was damaged by an Iranian missile attack, with repairs potentially taking years. In contrast, BP has minimal direct exposure to production assets in the Middle East and has not experienced disruptions on a similar scale. Chevron also faced a disruption, losing about 6% of its quarterly output due to a fire at its Tengiz project in Kazakhstan—unrelated to the war—though its share buyback program remains ongoing.
The divergence extends to trading strategies. European oil majors like BP operate much larger trading divisions than their U.S. counterparts, enabling them to capture significant profits from the extreme price volatility induced by the conflict. BP has explicitly described its trading performance as "exceptionally strong," while Shell and TotalEnergies have also signaled profits exceeding expectations. Exxon and Chevron employ more conservative trading approaches. The two U.S. companies typically use derivatives to hedge the price risk of shipped cargoes. This strategy is expected to result in nearly $7 billion in mark-to-market losses for the first quarter. However, the companies anticipate these "time-based" losses will fully reverse in subsequent quarters as customers take delivery of the cargoes.
"Markets are in a state of crude under-supply, and normalized prices will stay higher for longer. But there are clear near-term divergences in individual stock performance—Exxon has trapped barrels, while BP is benefiting from a new CEO and a potential turnaround story," noted James West, an energy analyst at Melius Research.
Financially and strategically, BP has prioritized debt reduction, having previously suspended its share buyback program. RBC Capital Markets analyst Biraj Borkhataria suggests that in the current environment, BP's optimal strategy is to direct all excess cash flow toward reducing debt rather than restarting buybacks. This would enhance its financial flexibility and create room for future expansion in oil and gas exploration and production. CEO O'Neill, a former Exxon veteran with two decades of experience, is accelerating BP's renewed strategic focus on fossil fuels. In March, the company received approval from the Trump administration to launch its first new project in the Gulf of Mexico since the 2010 Deepwater Horizon disaster and acquired stakes in offshore blocks in Namibia, entering a top global exploration hotspot.
In contrast, Exxon is expected to maintain its industry-leading quarterly buyback pace of $5 billion. TD Cowen analyst Jason Gabelman anticipates that Chevron may raise its buybacks by 25% to $3.8 billion this quarter, with further increases possible later.
Looking ahead, while a "higher for longer" oil price environment is "unquestionably positive" for BP, the company still needs to rebuild investor confidence to sustain long-term outperformance, warns Joshua Stone, Head of European Energy Equity Research at UBS. The market will closely monitor the upcoming earnings reports from the majors: BP on Tuesday, TotalEnergies on Wednesday, Exxon and Chevron on Friday, and Shell on May 7th. Key indicators for judging the sustainability of BP's share price rebound will be its progress on debt reduction following the buyback pause and its ability to consistently deliver growth in its traditional oil and gas operations.
The Iran conflict has fractured the previously stable performance hierarchy among oil majors. European giants are riding high, leveraging strong trading capabilities and lower exposure to Middle Eastern assets, while their U.S. counterparts face near-term pressure from trapped production and conservative hedging strategies. However, whether BP's "turnaround story" fully materializes remains to be proven by time and upcoming financial results.
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