Exxon Mobil Corporation (XOM) saw its shares decline approximately 4% on Monday, sliding to $141.10 as a sharp drop in crude oil prices weighed heavily on the energy giant. The downturn was triggered by news that the United States and Iran have reached a framework agreement to end hostilities and reopen the strategically vital Strait of Hormuz, a key chokepoint for global oil shipments. The stock hit a session low of $137.78 before recovering slightly.
Oil Prices Plunge on Supply Hopes
The deal between Washington and Tehran raised expectations that oil supply disruptions related to the conflict could soon ease, prompting a significant sell-off in crude markets. Brent crude, the international benchmark, fell 5.02% to $82.95 per barrel, while West Texas Intermediate (WTI) crude dropped 5.42% to $80.28 per barrel. Both benchmarks touched their lowest levels since March 10, according to data from Reuters. The move reflects traders pulling back some of the war premium that had been built into prices since the start of the conflict.
"With a wall of oil supply very possibly on the way, the sell-off looks justified," said Dennis Kissler, senior vice president of trading at Bok Financial, in comments to Reuters. The US and Iran are expected to sign a memorandum of understanding in Switzerland on Friday, with further negotiations planned over the next 60 days to finalize the reopening of the strait.
Energy Sector Under Pressure
The broader energy sector felt the heat as well, with major players like Chevron (CVX) also posting losses. Refiners such as Valero (VLO), Marathon Petroleum (MPC), and Phillips 66 (PSX) slipped alongside Exxon. The sell-off was broad-based as the deal removed much of the immediate geopolitical risk that had supported oil prices. Benzinga noted that Exxon's stock broke through several short- and medium-term moving averages during the session, signaling technical weakness.
Earnings and Margin Concerns Loom
However, Monday's decline was driven by more than just oil price movements. Investors entered the session already concerned about Exxon's softer earnings performance. First-quarter net income fell to $4.2 billion, down sharply from $7.7 billion in the same period last year, even as sales and other operating revenue climbed to $83.161 billion. The company's gross margin for the quarter came in at 25%, the lowest level in eight quarters, according to a review by TIKR.com. This margin compression has added to the bearish sentiment surrounding the stock.
Production Offsets and Valuation Debate
Despite the headwinds, some analysts see reasons for optimism. Exxon reported first-quarter net production of 4.6 million oil-equivalent barrels per day, with its Guyana operations reaching a new quarterly high of over 900,000 gross barrels per day. Additionally, the company's Golden Pass LNG project produced its first output from Train 1. Kalkine Media pointed to Guyana's growth and steady dividends as factors that suggest the pullback is being viewed as a test of valuation rather than a fundamental sell-off tied specifically to Exxon.
Supply Normalization May Take Time
While the reopening of the Strait of Hormuz is a positive development for global supply, the path to normalizing oil flows is not immediate. "It's going to take time for people to feel comfortable," said Daniel Evans, global head of fuels and refining research at S&P Global Energy, in an interview with the Associated Press. Shipping logistics, insurance requirements, and restart procedures are all delayed, meaning that a rapid return to pre-conflict supply levels is unlikely. This uncertainty could keep oil prices volatile in the near term.
For big oil companies like Exxon, lower crude prices are not an unqualified win. While cheaper oil may benefit refining margins, upstream profits decline as prices drop. The net effect will depend on how quickly supply chains normalize and how trading operations perform in the coming months.
