Expert views
The Iran–US conflict has pushed oil and gas prices higher, sending shockwaves through the global economy and key industries. In this piece, Anthony de Ruijter, Global Team Lead – Industrials, Materials & Energy (IME), and his team summarise our experts’ most up-to-date views on what this means for key industries.
Airlines
The current oil price means airlines are facing a double whammy: surging fuel costs and a potentially weaker top line—at least relative to the previous analyst consensus on Bloomberg. This year was supposed to be a rebound year for revenue growth after an underwhelming 2025.
Source: Bloomberg
Furthermore, for European airlines in particular, airspace constraints have limited the rerouting of capacity, and the supply squeeze has meant that European full-service carriers are now charging a 50% premium on direct Asia routes compared with those via Middle East layovers, according to Third Bridge experts. With affordability already a top-of-mind issue for consumers, sensitivity to drastic ticket price changes may eat into revenue growth and lead to results that differ from previous analyst expectations.
When examining the earnings outlook for airlines and the impact of fuel cost shocks, Third Bridge experts have highlighted a significant difference in hedging strategies between US and European carriers. The recent spike in fuel prices could reduce European carriers’ margins by roughly 2%, whereas US airlines are largely unhedged and therefore fully exposed to the surge in fuel costs.
For example, a 10% increase in fuel costs would cost Delta approximately $1 billion more in 2026 compared with last year, while United would face an additional $1.1 billion this year. According to Delta's 2025 financial results, although Delta benefits slightly from its refinery operations—gaining 4 cents per gallon on a total 2025 fuel cost average of $2.30 per gallon1—fuel remains a commodity that all airlines must purchase at the market price.
Source: Company reports
Transcript references:
Southwest Airlines – Elevated Expectations & Product Transition Progress
Oil
Unlike four years ago, when the Russia–Ukraine conflict began, developed economies are sitting on comfortable stockpiles of crude oil and refined products. Consensus expectations for 2026 were that the market would remain oversupplied and that inventories would continue to climb. Third Bridge experts have been consistently more optimistic on demand but still anticipated inventories moving higher.
Source: Energy Information Agency
However, the loss of volumes through the Strait of Hormuz will quickly evaporate the excess inventories. The release of strategic reserves from OECD countries will only partially mitigate the shortfall. Governments, including the United States, largely missed the opportunity to materially increase strategic reserves at lower prices over the past three years.
So what are the alternatives for oil supply? In the short term, there are very few outside of Russia, and relying on those supplies becomes a political decision. Third Bridge experts do not expect a material increase in Venezuelan production until the end of the decade, although it could potentially contribute a few hundred thousand barrels per day in the months ahead.
Closer to home, California’s Sable Offshore presents an interesting opportunity for a roughly 50,000‑barrel‑per‑day increase in US oil production in the near term, as the Trump administration uses a Cold War‑era directive to push the company to restart operations.2 Sable Offshore’s pipeline systems have been shut down since a 2015 oil spill, and its potential restart illustrates how higher‑cost producers may be brought back into a market where high prices incentivise even the latter quartiles of the cost curve. Even with these examples, there are few alternatives for oil supply in the short term, based on our experts’ insights.
While US oil production has largely flattened out, the oil‑directed drilling rig count is more than 20% below where it was at this time in 2022. US producers have been curtailing budgets in anticipation of lower prices and a market oversupply; it will take months to sort out the logistics to reaccelerate production growth. But given where oil prices currently are, our experts expect producers to try.
Transcript references:
Sable Offshore – Can It Get Production Back Online?
Baker Hughes – Offshore Activity Update & Venezuela Upside
Halliburton – VoltaGrid Partnership & Venezuela Market Upside
Natural Gas
Roughly 20% of the world's liquefied natural gas (LNG) comes from Qatar3, which is now constrained following its early March force majeure declaration. Similar to four years ago, when the Russia–Ukraine conflict began, Europe will need to look elsewhere for natural gas supplies. At that time, American "molecules of freedom" were available as new projects came online.
We recently spoke with industry experts on the Eastern Mediterranean natural gas industry. While security remains an obvious concern, this region has become a massive and growing resource, some of which lies within the European Union in Cyprus. Before the current conflict, Chevron announced its final investment decision this year to expand the Leviathan project in Israel4 and was awarded several exploration blocks in Greece5.
However, in the short term, Europe remains critically low on gas inventories as we exit the winter withdrawal season. Asian buyers remain interested in accessing the natural gas resources in the US. One of our global LNG experts noted that the current disruption in Qatar increases US leverage in the Trump-Xi summit later this year as China continues to seek supply commitments.
Source: Gas Infrastructure Europe
While the market remains preoccupied with current events, Third Bridge experts have also provided insight on potential long-term impacts. Focusing again on Qatar as a key global LNG producer, bottlenecks resulting from the Middle East conflict could be severe enough to delay major capacity expansions expected in 2027 under Qatar’s North Field Expansion Project. This could push nearly 50 million tonnes per annum (MTPA) of LNG capacity further out than previously anticipated, reducing projected supply.
With supply constraints representing a clear pricing tailwind, our experts have also highlighted demand destruction as a major structural risk. While the critical “demand destruction” threshold of $20 per Million British thermal units (MMBtu) for European gas prices has not yet been breached, even at current LNG pricing levels, more sensitive consumers, such as Vietnam, may consider delaying their coal-to-gas transition, which could reduce longer-term global LNG demand.
Transcript reference:
Eastern Mediterranean Gas – Zohr Gas Field Development & Leviathan Expansion Project
LNG Sector – Middle East Conflict's Impact on Trade Flows, Demand Dynamics & 2026 Supply Wave
Chemicals
This sector has been among the most-read across our client base. The challenges have been particularly acute in Europe, where the surge in feedstock costs could take a month to flow through to product prices via surcharges, exposing chemical producers to significant lag. Third Bridge experts have noted that even with sharply higher chemical prices, feedstock cost inflation could still be severe enough to erode margins. Major operators in the region will likely need to maintain high plant and cracker utilizations to survive. More lasting concerns also arise around potential demand destruction from cost pass-throughs, as well as the risk that European chemical producers could build high-cost inventories just as any future de-escalation causes key chemical prices to collapse.
Even before the recent surge in oil and natural gas prices, the European chemicals sector was already facing serious headwinds, notably from weak demand and competition from imports. While the European Union has attempted to use anti-dumping duties to shield domestic producers from cheaper Asian imports, our experts consider these measures likely to fall short, as the rules can be easily circumvented downstream. Furthermore, carbon regulations are set to impose future constraints and could penalize older assets relative to best-in-class performers (such as plants benefiting from French nuclear generation). With these headwinds on the horizon, one of our experts predicts that the EU could produce only half of its current chemical volumes in ten years, regardless of what happens with feedstock costs. In light of this, “dramatic policy changes” will be needed to level the playing field with American and Chinese competitors.
Source: CEFIC, Eurostat
In the near term, our experts are monitoring how the changing US tariff regime will impact Europe. Chinese producers responded by dumping products into Europe after Liberation Day, which may be one headwind that eases in the year ahead.
Transcript reference:
Ineos – Inovyn – Potential Carve-out of the PVC Business & Middle East Conflict's Impact on Price
European Chemicals – Can EU Anti-dumping Duties Protect the Industry From Cheaper Asian Imports?
Röhm – What Will the Crude Oil Price Spike Do to MMA Markets?
Anqore & European Acrylonitrile – Competitive Positioning on the Cost Curve
Defense
Capacity has been top of mind for our defense experts. Years of accelerating defense spending growth since the Russia-Ukraine conflict have stretched the supply chain to its limit, and it is now constraining revenue growth in key parts of the industry. This is something we covered in depth even before the outbreak of the Iran-US conflict.
One aspect of the conflict in the Persian Gulf that we have recently examined in depth is drone warfare. Rheinmetall's airburst ammunition technology and revolver gun capability remain key differentiators. While new entrants are emerging, our experts expect Rheinmetall's market share to remain around 90%, reflecting its early investment.
Source: Eurostat
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The shipping market
Experts noted that following the Iran-US conflict, daily vessel traffic through the Strait of Hormuz has dropped from around 100–120 ships to fewer than five. At the same time, the insurance market has classified the entire Gulf region as high risk, making major shipping companies unwilling to take the risk of transiting the area.
Our experts estimate that, in this Middle East conflict, oil tanker shipping will be impacted to a greater or at least equal extent as LNG shipping, followed by the dry bulk shipping market, while the container shipping market will be relatively less affected. With that stance, one Third Bridge expert expects companies such as Frontline, DHT, COSCO Shipping Energy, and China Merchants Energy Shipping to potentially see major Q1-2026 profit growth year-over-year, with short cash collection cycles. In contrast, container shipping players such as COSCO Shipping Holdings may experience revenue growth without corresponding earnings growth due to rising operating costs.
Looking at the full year, our experts expect the oil tanker market to remain at elevated but volatile levels, the LNG market to experience pronounced cyclical fluctuations, the dry bulk market’s freight rate baseline to trend upward, and the container shipping market’s price baseline to decline.
Transcript reference:
All insights in this article are based on information shared by Third Bridge experts.
For media enquiries, please contact us at comms@thirdbridge.com.
References:
5. https://oilprice.com/Company-News/Chevron-Secures-Offshore-Greece-Leases-in-Med-Expansion-Push.html
