Exxon Mobil CEO Darren Woods dropped a blunt warning on investors Friday: the oil market is sitting on a time bomb, and most traders haven’t realized it yet.
Speaking on the company’s first-quarter earnings call, Woods argued that current oil prices don’t reflect the true scale of disruption caused by the Iran war and the closure of the Strait of Hormuz. U.S. crude fell to $101.38 per barrel Friday, while Brent settled around $108, prices Woods described as oddly calm given the circumstances.
The reason for this disconnect is simple. Right now, three emergency buffers are propping up the market. Loaded oil tankers that were in transit when the conflict began are still reaching their destinations. Strategic petroleum reserves have been released. Commercial inventories have been drawn down. But here’s the catch: these sources won’t last forever.
“There’s more to come if the strait remains closed,” Woods said, according to reporting on his earnings call remarks.
The Clock Is Ticking on Supply Cushions
Once those three supply sources get exhausted, oil prices will face serious upward pressure. It’s not complicated math, but it does require patience to play out. Woods suggested we’re looking at a month or two before the full impact hits, assuming the strait reopens relatively soon.
Even when the strait does reopen, the recovery won’t be instant. Tankers need to be repositioned. Backlogged supply needs to work through the system. Vessels still need time to reach their final destinations. It’s not like flipping a switch.
Then there’s the refill problem. Once the conflict ends, governments and industry will need to rebuild depleted strategic reserves and commercial inventories. That’s fresh demand hitting an already-strained market, pushing prices higher still.
Exxon itself faces meaningful pressure. The company projects a 750,000 barrel-per-day production decline in the Middle East if the strait stays closed through the second quarter. That’s roughly 15% of Exxon’s total upstream production. Separately, Iranian attacks damaged two liquefied natural gas production lines in Qatar where Exxon has an ownership stake, affecting roughly 3% of the company’s upstream output in 2025.
When Reality Catches Up to Markets
What’s striking here isn’t Woods’ analysis but rather the market’s apparent indifference to it. Oil futures have been a rollercoaster, spiking on escalation fears and crashing on peace hopes. Yet the underlying price level suggests investors still believe this situation will resolve without severe supply constraints. History suggests otherwise.
The gap between what’s happened (oil up 57% since the war started) and what hasn’t fully happened yet (true market-wide absorption of sustained disruption) points to a reckoning ahead. For context on similar business and energy market dynamics, broader market conditions have shown this kind of lag before.
Exxon’s stock, notably, hasn’t benefited from the oil rally. Shares are essentially flat since the conflict began, despite crude’s 57% surge. That suggests either investors don’t believe Woods’ warning about worse-to-come pricing, or they think Exxon’s operational challenges will offset any revenue gains from higher oil prices.
The market’s reluctance to price in the full disruption might simply reflect hope that the strait reopens soon. But if this conflict drags on, Woods’ warning will start looking less like corporate caution and more like prophecy.
