Darren Woods, CEO of Exxon Mobil, made a striking claim on the company’s first-quarter earnings call: the market has no idea what’s coming. The closure of the Strait of Hormuz and the ongoing Iran conflict have created an unprecedented disruption to global oil supply, he said, but investors and traders are pricing in a much rosier scenario than reality warrants.
The reason? Band-aids. Loaded oil tankers that were in transit when the war started, strategic petroleum reserves being tapped, and commercial inventory drawdowns have all kept prices from spiking the way they otherwise would. These buffers are temporary. Once they’re gone, Woods warned, oil prices will climb sharply if the strait stays closed.
“There’s more to come if the strait remains closed,” Woods told investors.
The Price Disconnect Nobody’s Talking About
Here’s where it gets interesting. Oil has jumped 57% since the war began, which sounds enormous. Yet Exxon’s stock is flat over the same period. That mismatch hints at something Woods was essentially saying: current crude prices around $101 per barrel for U.S. crude and $108 for Brent are not reflecting the scale of the disruption.
Traders have been yo-yoing on war headlines. Prices spike on escalation fears, then plunge on peace hopes, then repeat. It’s the kind of whipsaw that leaves fundamentals in the dust. Woods is arguing that the fundamentals are worse than the market price suggests.
About 15% of Exxon’s total production has already been impacted by the strait closure. The company alone expects to see a 750,000 barrel-per-day production decline compared to 2025 levels if the closure persists through the second quarter. That’s just one oil major. Scale that across the industry, and you’re looking at a serious supply crunch.
Damage to Qatar’s liquefied natural gas export hub, which Exxon has a stake in, knocked out production lines accounting for roughly 3% of Exxon’s upstream output in 2025. Another piece of the supply puzzle falls away.
The Inventory Trap
What makes Woods’ warning worth taking seriously is the math. Strategic reserves and commercial stockpiles aren’t infinite. They exist precisely for situations like this, but once they’re drawn down, they’re gone. At that point, the market faces a simple reality: real, ongoing supply disruption with no buffer.
The timeline matters too. Woods expects Persian Gulf oil flows to normalize within a month or two after the strait reopens. But that’s assuming reopening happens. And even when it does, there’s a lag. Tankers need repositioning. Supply backlogs need clearing. Vessels take time to reach destinations. We’re not talking about a light switch flipping back on.
Then comes the refill problem. Governments and industry will need to replenish their depleted reserves and inventories once the conflict ends. That creates a new wave of demand on top of returning to normal supply patterns. More demand plus ramped-up supply chains equals upward price pressure.
The Stock Market’s Verdict
Here’s the head-scratcher: if Woods is right about prices heading higher, why is Exxon’s stock going nowhere? Oil prices up 57%, Exxon stock flat. There are a few ways to read this. Maybe the market thinks the disruption won’t last. Maybe energy investors are already pricing in the scenario Woods is describing. Or maybe there’s skepticism about whether higher oil prices will actually translate to higher Exxon profits given operational constraints.
The market’s disconnect from the oil price surge is worth watching. It suggests that either equities traders don’t believe the supply story, or they believe it but think Exxon has too many complications to benefit cleanly from higher crude costs.
What Happens Next
Woods is essentially saying: enjoy the relative calm while it lasts, because it’s temporary. Supply disruptions usually feel abstract until they become concrete. Tankers run empty. Refineries have fewer barrels to process. Prices move in ways that catch everyone off guard.
The business world loves to forecast recovery timelines that feel tidy and orderly. Woods is pushing back on that instinct, suggesting the real test hasn’t arrived yet.
If he’s right, the market’s relative price stability over recent weeks represents a false floor. If he’s wrong, and the situation resolves faster than he anticipates, then today’s oil prices might look prescient. The difference between those two scenarios could be tens of dollars per barrel and billions in corporate earnings.
The uncomfortable truth is that geopolitical supply shocks don’t usually resolve on anyone’s timeline except their own.
