Shares of Exxon Mobil Corp (NYSE: XOM) rose slightly in early trading on Monday, after tanking on Friday following the company's mixed first-quarter (Q1) results.
The U.S.'s war in Iran negatively affected the company's volumes in Q1. The closure of the Strait of Hormuz, resulting from the conflict, will adversely affect Q2 production, according to JPMorgan analyst Arun Jayaram.
The Exxon Mobil Analyst: Jayaram reiterated an Overweight rating, while raising the price target from $170 to $173.
The Exxon Mobil Thesis: The decline in Middle East volumes negatively impacted the company's Q1 earnings by $430 million, or 10 cents per share.
Exxon Mobil noted upstream production could decline by 750 MBoe/d (million barrels of oil equivalent per day) and result in 3% lower throughput for Product Solutions in the second quarter if the Strait of Hormuz remained closed for the entire quarter, Jayaram said.
CEO Darren Woods said that the market was yet to feel the full impact of the Strait of Hormuz closure. So far, shocks have been absorbed by oil in transit, release of strategic reserves, and commercial inventory drawdowns.
"Looking ahead, the management team anticipates a 1- to 2-month lag between the SoH (Strait of Hormuz) reopening and normalized flows, followed by a period of elevated demand as governments replenish inventories," he further wrote.
Outside the Middle East, the company expects sequential growth in production of 150 MBoe/d in the second quarter, while Product Solutions could remain flat due to scheduled maintenance, the analyst added.
Jayaram raised the 2026 and 2027 earnings estimates from $11.09 per share to $11.51 per share and from $10.06 per share to $10.49 per share, respectively.
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President Donald Trump announced on Sunday that the U.S. would begin a new operation on Monday to guide stranded ships safely through the Strait of Hormuz, following recent attacks on two vessels in the region.
The initiative, named "Project Freedom," aims to assist hundreds of ships and around 20,000 seafarers affected by tensions with Iran.
Trump emphasized that neutral countries have been impacted by the conflict and assured them that the U.S. would help navigate their vessels through the waters. Iran swiftly condemned the move, calling it a violation of the ceasefire. Trump also mentioned ongoing discussions with Iran that could lead to a positive outcome for all parties.
XOM Price Action: Shares of Exxon Mobil had risen by 0.22% to $153.11 at the time of publication on Monday.