KEY POINTS
- Shell recorded $6.92bn profit driven by volatility from the Iran-related conflict.
- Trading and refining operations performed strongly, though hedging losses and legal charges reduced gains.
- Production outlook weakened due to Gulf disruptions, with major facility damage and lower output expected.
Shell has reported a strong financial performance, posting adjusted profits of $6.92 billion for the first quarter of 2026, marking its highest quarterly profit in two years.
The result represents a nearly 25% increase compared to the same period last year and came in above analyst expectations of $6.36 billion.
Chief executive of Shell Wael Sawan said the ongoing Iran-related conflict and wider Middle East tensions have significantly disrupted global energy markets, tightening supply and increasing volatility.
He noted that the market is facing a major supply gap, estimating that about 1 billion barrels of oil have been effectively removed from global supply due to the conflict’s impact.
He also pointed to continued disruption around key shipping routes such as the Strait of Hormuz, which is worsening supply pressures and prolonging instability in global energy flows.
Shell’s trading and refining businesses played a major role in the company’s strong earnings, benefiting from sharp swings in global oil and fuel prices.
The company’s refining segment, which operates facilities in Europe and North America, recorded profits of more than $2 billion in the quarter, as prices for petrol, diesel and jet fuel fluctuated heavily.
Shell explained that such volatility often benefits trading operations, as it creates opportunities in arbitrage and hedging activities involving airlines, utilities and other major energy consumers.
However, the company also faced significant losses during the period, including a $2.4 billion write-down linked to hedging contracts affected by rapid price changes.
It also recorded a $635 million legal charge tied to its gas operations.
Production disruptions and Gulf damage weigh on outlook
Despite strong profits, Shell warned of a significant drop in production due to damage to facilities in the Gulf region.
The company reported lower gas output in the first quarter and expects production to fall by at least 30% in the second quarter.
Chief executive Wael Sawan said Shell is assuming no output from some Qatar-linked operations in the short term, representing a loss of about 300,000 barrels of oil equivalent per day.
A key facility, the Pearl gas-to-liquids plant in Qatar, was damaged by missile strikes and will require extensive repairs estimated at about $500 million, with restoration expected to take around a year.
Shell added that higher gas prices may partially offset the impact of lower production volumes.
Shell increased its dividend by 5%, signalling continued commitment to shareholder returns despite market uncertainty.
At the same time, the company reduced its share buyback programme from $3.5 billion to $3 billion, reflecting caution over future geopolitical and market risks.
Net debt rose to $52.6 billion compared to the previous year, though the increase was lower than some analysts had expected.
The company’s financial officers said Shell is balancing strong short-term earnings with longer-term risks linked to global instability and repair costs.
