Oil Market Swings, Not Price Spikes, Set to Drive Big Oil Strategy
Ron Bousso
May 11, 2026
Oil majors are bracing for prolonged turbulence in energy markets, which should curb any temptation to ramp up spending after the Iran war. The biggest fear now is not missing the next rally, but being on the wrong side of the inevitable retreat.
The Middle East conflict and the near-airtight closure of the Strait of Hormuz since February 28 have triggered an unprecedented oil and gas supply crunch, pushing crude prices above $100 a barrel and sparking a global search for alternative supplies.
Even if a U.S.-Iran peace deal is reached soon, the damage is done. The loss of more than 13% of global oil supply and roughly a fifth of LNG flows, combined with the extensive damage to energy infrastructure across the Gulf, will likely have long-lasting consequences that put a floor under prices for years.
On the face of it, this should be the ideal backdrop for energy majors such as BP BP.L, Chevron CVX.N, Exxon Mobil XOM.N, Shell SHEL.L and TotalEnergies TTEF.PA to ramp up spending, expand production, and capture market share. All five beat first-quarter earnings expectations.
Yet the industry’s response has been strikingly restrained thus far. None of the majors has raised spending plans for 2026 or beyond.
"You will see capital and cost discipline no matter what," Chevron CEO Mike Wirth told analysts on May 1.
That caution reflects a structural shift in boardroom priorities. After years of aggressive expansion from the early 2000s led to about $200 billion of impairments over the past decade, the industry has pivoted towards capital discipline and prioritising shareholder returns. Investors who once rewarded growth now demand high cash flow.
One might argue that today's restraint also highlights the mismatch between a short-term supply shock and the lengthy timelines of large-scale oil and gas projects.
However, if companies wanted to respond quickly, bringing barrels to market faster and at lower risk, they would have options. These include tapping into U.S. shale projects, which operate on a shorter cycle, or connecting reservoirs close to existing offshore infrastructure.
Even here, however, restraint prevails. Chevron and Exxon have resisted pressure from U.S. President Donald Trump’s administration to boost output in response to the Middle East crisis, underscoring how deeply embedded capital discipline has become.
Into the Unknown
Underlying that caution is deep uncertainty over future prices.
Benchmark Brent has swung violently since the start of the war, surging more than 60% to a peak of $118 a barrel in late March before slipping back towards $100. Daily moves of 5% or more, which historically have been relatively rare, have occurred on 16 of the 50 trading days since the conflict began.
Yet further along the curve, the signal is far calmer. The January 2030 Brent contract trades around $73 a barrel, only modestly above the $67 level seen on February 27.
While futures contracts should not be confused with forecasts, this muted long-term price move sends a mixed signal. If supply losses are structural and geopolitical risk has permanently risen, why are long-term prices barely moving?
One explanation is that investors are still pricing in a relatively swift normalisation. But that looks increasingly optimistic. Nearly one billion barrels of Middle Eastern supply have already been lost, global inventories are being rapidly drawn down, and even a full reopening of Hormuz would not quickly restore output. Rebuilding damaged infrastructure and spare capacity is likely to be a slow, uneven process.
At the same time, structural uncertainty is rising on both sides of the supply/demand equation. Demand continues to grow despite expectations of an energy transition-driven plateau, while supply has become more concentrated, more exposed to geopolitical risk, and less cushioned by spare capacity. The result is a market that is not just tight, but brittle.
In that environment, price volatility itself becomes the dominant risk.
"We produce a commodity that, if you look at over the last six years, has had pretty extreme price volatility. So we need to make sure that the decisions we're making on the portfolio and the business allow us to be profitable through the cycle," BP CEO Meg O'Neill told analysts on April 28.
The industry has spent years preparing for exactly this type of scenario. Costs have been cut aggressively, portfolios streamlined, and break-even levels reduced. According to RBC Capital Markets, the five largest Western majors can now sustain dividends at oil prices below $60 a barrel.
That resilience removes the urgency to chase short-term price spikes.
Volatility Ahead
Oil majors' investment decisions have long served as a bellwether for how the industry views the future. Today, that signal is unambiguous.
To be sure, spending is still expected to rise between 2026 and 2030, but that was the case before the war, driven by concerns that supply growth would struggle to keep pace with demand after years of underinvestment.
But recent events have done nothing to ramp up these plans. If anything, they have reinforced a more conservative mindset.
Rather than betting on a prolonged price boom, companies are positioning for a world defined by sharper swings, recurring disruptions, and persistent uncertainty. The restraint on display suggests volatility, not scarcity, will define the next phase of energy markets.
(The opinions expressed here are those of Ron Bousso, a columnist for Reuters.)
(Reuters - Ron Bousso. Editing by Mark Potter)
