Fri, 27 Aug 2026 marked six months since US & Israeli bombing of Iran triggered a conflict that has disrupted global energy supplies and sent ripples through global financial markets.
It is also a strike that has transformed into a protracted, costly stalemate rather than the swift victory initially predicted.
Below chart shows how the conflict has affected oil, equities, safe-haven assets and food prices.
More importantly, the Reuters post shows why oil stocks will remain on a high as we head towards 31 Dec 2026 and into new year 2027.
(1) Costly Energy.
Oil prices soared as Gulf production was disrupted and shipments through the Strait of Hormuz curtailed.
Brent crude briefly topped $120 in April 2026 and still averages about $90 in 2026, up from roughly $70 last year. (see below)
The biggest impact has been on refined fuels.
Diesel prices have risen more sharply amid (1) shortages of middle distillates, (2) Russian refinery outages caused by Ukrainian attacks and (3) lost Gulf export flows. (see below)
Jet fuel was initially hit hard given the Gulf's importance, though a surge in US refinery output and exports helped ease supply fears.
With the northern hemisphere winter fast approaching, further disruption to Hormuz shipments coupled with risks to Russia's energy infrastructure could push up heating-oil and inflationary pressures.
Even after supply and demand adjustments, global inventories have been drawing at record rates of 2.8 mb/d over the past 6 months; observed oil stocks are now 507 mb lower than at the war’s onset, with IEA members releasing more than 300 mb of emergency stocks.
Last but not least, non‑OECD crude inventories fell by -105 mb.
Most of this decrease (-65%) came from above-ground tanks in China, while the rest mostly came from less oil being stored on ships at sea.
Because these backup supplies are running out fast, it is becoming more urgent to fully reopen the Strait of Hormuz and the bypass routes.
(2) AI Boom Cushions Stocks.
Global stocks have largely shrugged off the war, buoyed by the trillions of dollars pouring into the AI sector.
MSCI's 47-country world stocks index hit a $105 trillion record high in August 2026, gaining almost $7 trillion (or +9%), since the war erupted, though stocks in the Gulf region have underperformed. (see below)
Fidelity analyst Pranav Aggarwal said:
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The broader rally suggested investors were taking a "relaxed view" and still expected the war to end this year.
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Also equities are actually having a pretty good year. Up +14% or so (for the year).
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If 8% - 9% can be expected in a standard year, +14% up till August 2026 is pretty good.
(3) Searching for Safety.
None of the usual safe-haven assets, eg. highly rated government bonds, gold, and US dollar, have consistently acted as safe havens during times of trouble.
The US dollar has risen +1.4% against a basket of major currencies since the war began, though much of that reflects the Japanese yen's weakness, analysts noted.
US Treasuries, a traditional mainstay in portfolios have lost -3.5% on a total return basis as higher inflation has dashed US rate cut bets on 16 Sep 2026 when US Fed further raised interest rate by +0.25%, for the 1st time in 3 years.
Concerns about new Fed chief Kevin Warsh is a crony of Trump and Washington's surprise debt buyback plans have also weighed.
Gold fell nearly -25% between the start of the war (28 Feb 2026) and July 2026, though it had more than trebled in price since 2022 when Western powers froze Russia's central bank reserves over the invasion of Ukraine. (see above)
Gold has rebounded more than +15% in the August month, amid renewed concerns about dollar debasement.
(4) Food and Fertilisers.
The Strait of Hormuz closure has also disrupted fertiliser shipments, a key input for global food production.
Combined with a strong El Niño and fresh disruptions to grain shipments linked to the war in Ukraine, analysts say the shock increasingly threatens agricultural output.
According to UN Food & Agriculture Organization (FAO), food prices rose in July 2026, to a more than 3-year high and experts warn that much of the impact is yet to be felt.
The FAO has warned the world could be heading towards another bout of food inflation.
$JPMorgan Chase(JPM)$ estimates that a strong El Niño alone could, at its peak, lift global food inflation by around +0.7%.
The impact is likely to be felt most acutely in Asia, Latin America and Africa, where households spend a larger share of income on food and policymakers remain wary of renewed price pressures.
(5) Gulf Clubbed.
Gulf oil production and exports remain heavily restricted.
According to Reuters. in August 2026, Hormuz flows averaged only 7.6 mb/d, still -13.1 mb/d below pre‑war levels, with cumulative export losses approaching 2.8 billion barrels.
Even bypass routes via Yanbu (Saudi Arabia) and Fujairah (UAE) that initially offset some losses, rising from 4.1 mb/d in February 2026 to a peak of 7.8 mb/d in June 2026. (see below)
However, with Houthi’s recent stepped up attacks in the Red Sea and an early‑September shutdown of the Saudi East‑West pipeline, the regressive action has pulled those flows back to 5.5 mb/d in August.
Direct hit to the Gulf & its economies has been stark:
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Saudi Arabia's exports shrank by -10% between Q1 2026 & Q2 2026.
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JPM estimates Dubai's property sales have plummeted -70% to -80%.
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Oxford Economics warns Qatar's economy will shrink almost -30% in 2026, given the damage to its Ras Laffan gas facility.
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Qatar and UAE stocks have both dropped around -14%, a little more than 20 percentage point underperformance versus world stocks.
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The cost of insuring both countries' debt against a default has also risen, although more heavily indebted Bahrain has been hardest hit with its credit default swap prices up almost +40%.
Bright Sparks.
Amidst the chaos brought about courtesy of US & Israel, there’s a bright sparks that is expected to continue to shine brightly, even into 2027.
Energy companies have continuously benefited from the structural disruptions initialized on 28 Feb 2026.
One salient example is $Total SA(TTE)$, its Q2 2026 earnings results show precisely how a major integrated can profit from Middle East chaos.
On 23 Jul 2026, TTE reported:
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An adjusted net income of nearly $6.0 billion for Q2.
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Its up +67% YoY and its strongest quarter in nearly 3 years. (see below)
TotalEnergies - Net Income
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This has been driven by (a) higher oil prices, (b) exceptionally strong refining and trading margins created by Iran‑war supply disruptions. (see above)
Other Key Points.
Refining and trading surge:
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Income from Refining & Chemicals (that includes TTE’s oil trading division) rose +362% to $1.8 billion, helped by stronger fuel margins and robust oil trading that eclipsed the prior quarter’s $1.5 billion contribution.
High-price environment leveraged:
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Management said TTE is “leveraging its integrated model and portfolio diversification” in a high‑price environment linked to the Middle East conflict to post a $9.8 billion operating cash flow, that’s up almost +15% QoQ, besides the $6.0 billion adjusted net income.
Production impact contained:
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The conflict reduced TTE’s hydrocarbon output by an estimated -5% to –10% of total production (fluctuating between 5 – 15% during the quarter), with shut‑in LNG in Qatar and other regional disruptions.
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Yet, TTE still delivered record refining margins and strong downstream performance.
Margin detail:
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European refining margins increased by $13.50 /bbl on average during Q2 2026.
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Refining & Chemicals adjusted net operating income rose by +$200 million quarter on quarter to $1.8 billion,
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Cash flow meanwhile reached $2 billion as refiners prioritized diesel & jet fuel to capture stronger distillate margins.
Persistent Tailwinds.
Many analysts believe that even if permanent peace is brokered between the US & Iran, oil stocks will continue to reap the rewards, even into 2027.
Their strong convictions are based on the following reasons.
Structural refining tightness:
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The unprecedented context of Russian refining unavailability plus Middle East supply disruption to Asian refineries has pushed global refining margins to historically high levels.
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Even if fighting stops, years of underinvestment and distillate tightness mean margins can stay elevated as the system re‑balances.
Trading optionality remains:
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TTE’s ability to (a) source discounted barrels, (b) arbitrage products, and (c) manage logistics through contested routes does not vanish with a ceasefire.
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It simply normalizes, and the structural volatility premium and relationships built during the crisis endure.
Capital returns & Balance sheet strength.
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TTE achieved a record high of (1) Q2 2026 operating cash flow of $9.8 billion and H1 2026 cash flow of $18.4 billion (that’s up by +35% YoY).
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With ample firepower to sustain its shares buybacks & dividends, supporting the equity multiple even in a less volatile oil path.
Venezuela’s MOU.
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Last but not least, on 19 Sep 2026, Venezuela’s acting president Delcy Rodríguez signed a memorandum of understanding (MoU) with TTE.
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This was done via its subsidiary PDVSA., setting up the French major’s return to operations in Venezuela and falling under a reformed legal framework.
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Caracas is courting foreign investment to revive its oil and gas sector.
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Although the deal’s terms were not disclosed, the MoU adds a potential long‑dated growth lever.
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It also adds optionality on Venezuelan heavy crude, complimenting TTE’s existing portfolio and trading capabilities.
My viewpoints: (mine only)
From 27 Feb - 18 Sep 2026, TTE gained +13.04%, slightly trailing the $Energy Select Sector SPDR Fund(XLE)$, that rose +15.00%. (see below)
TTE vs XLE : 27 Feb - 18 Sep
Nevertheless, it delivered a strong and relatively resilient performance despite sharp volatility during the Middle East conflict, including a deep mid-year selloff and subsequent recovery.
The modest 1.96% underperformance suggests that TTE broadly participated in the sector rally.
Interestingly, over the same measuring period, $Exxon Mobil(XOM)$ gained +7.24% and $Chevron(CVX)$ +12.18%.
Overall, TTE’s performance suggests that it is a dependable asset and a definite "keeper" for investors seeking exposure to traditional energy security.
Its robust cash flows, strategic international footprint, and ongoing adaptation make it a strong portfolio anchor. Agree ?
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Comments
Brent crude futures fell 3.4% to $100.34 a barrel, and West Texas Intermediate dropped 4.5% to $95.78 a barrel, their lowest closes since 08 Sep 2026.
Naturally, TTE followed in tandem dipping by -0.79% (see attached). This is less than XOM (-2.99%) and CVX (-2.79%). The 'damage' is less comparatively speaking. Agree ?
Brent is still at $98.17 but WTI has fallen below the $90 mark at $89.99. (see attached).
I think no guessing is required on where energy stocks (oil) will be heading today.
All 3 stocks are spotting a lower opening price, dipping by -0.89%, -1.41% and -1.11% respectively.
With Chinese President Xi Jinping due for an official visit on Wed, 23 Sep 2026, really don't think Trump will initial an attack on Iran, during Xi's visit.
What different will 2 days make when the disruption has already lasted for 6 months already. Law of relativity -no ?
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