President Trump told Fox Business this week he would hold the line on Iran sanctions. “No we’re not talking about easing of sanctions, or giving them money, no sanctions no money, no nothing, they are starting to give us what they have to give us, if they do, that is great if they won’t, man on my left will finish them off,” with the Secretary of Defense seated beside him, he addressed the Strait of Hormuz, where 35% of global oil flows and through which Iran has tried to impose transit tolls: “It is international waters, no one controls it, we’ll watch over it, but no one will control it that is part of the negotiations that we have.”
Meanwhile, oil markets read that as de-escalation. West Texas Intermediate settled below $89 per barrel, a six-week low, even as the hardline stance suggests the risk premium is being unwound prematurely. Polymarket traders agree with the skeptics: the “Trump agrees to Iranian oil sanction relief by May 31” contract trades at $0.15, with the asset-unfreeze contract at $0.14 and the Strait of Hormuz transit-fees contract at roughly $0.0155. April’s identical contracts all resolved NO.
What the oil majors actually showed
Exxon Mobil (NYSE:XOM | XOM Price Prediction) absorbed the disruption head-on. Q1 2026 Adjusted EPS came in at $1.16 versus $1.01 expected, but reported net income fell to $4.18 billion after $706 million in Middle East supply-disruption losses and $3.88 billion in unfavorable mark-to-market derivative timing. Underlying earnings rose to $8.77 billion.
CEO Darren Woods, per the company’s Q1 8-K, called the quarter a stress test the company passed. Production hit 4.6 million boe/d with Guyana above 900,000 gross bpd. XOM shares slid 7% over the past week to $147, though they remain up 20% year to date.
Moreover, Chevron (NYSE:CVX) posted adjusted EPS of $1.41 versus $0.97, with production up 15% to 3,858 MBOED on the Hess acquisition and record US output above 2 million bpd. Curtailments in Israel and the Partitioned Zone were offset by Tamar and Leviathan expansion startups. CVX has dropped 5.5% in the last week on the Iran-thaw narrative. Both names are buying back stock aggressively: Exxon has $20 billion planned for 2026, Chevron repurchased $2.5 billion in Q1.
The defense complex is the cleaner trade
If the blockade is working as intended, with Iran “put oil in tubs and pots and pans they don’t have places to store their oil,” the munitions math is straightforward. RTX (NYSE:RTX) posted Q1 adjusted EPS of $1.78 versus $1.52, with Raytheon segment operating profit up 25% on Patriot and naval munitions demand. Backlog stands at $271 billion. Management raised FY26 guidance to sales of $92.5 to $93.5 billion. The stock trades at a forward P/E of 26x.
Lockheed Martin (NYSE:LMT) signed multiyear framework agreements with the Department of War expected to lift Patriot, THAAD, and PrSM production rates three to four times. EPS missed at $6.44 versus $6.70, free cash flow was negative $291 million, but FY26 guidance held at $77.5 to $80 billion in sales. Huntington Ingalls, the carrier and submarine yard, grew Q1 revenue 13.3% with backlog at $54 billion.
The purest geopolitical play sold off anyway
Frontline (NYSE:FRO), the Cyprus-based tanker operator, posted Q1 EPS of $2.51 versus $1.58 expected, with net margins of 40.2%. Management attributed the blowout directly to “unprecedented TCE rates resulting from significant disruptions caused by the Strait of Hormuz closure.” Shares fell 11% this past week, though they remain up 67.95% year to date. The forward P/E is 5x, and the dividend yield runs near 8.83%, both functions of the cyclical bet markets are now hedging.
What to watch
The EIA’s May Short-Term Energy Outlook forecasts Brent at around $106 per barrel in May and June, dropping to $89 in Q4 2026 and $79 in 2027 as Hormuz traffic gradually resumes. The WTI move below $89 is running ahead of agency forecasts.
That said, with global oil inventories drawing 8.5 million b/d in 2Q26, any military incident, and Iran laying mines during ceasefire negotiations, snaps the premium back hard. Retirement investors holding XOM and CVX for the dividend already own the option. The defense names are the bet that the blockade outlasts the deal.
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