Chevron expects its first-quarter earnings from oil production to rise by $1.6 billion to $2.2 billion, thanks to higher oil prices following the Iran conflict. However, the company warned that hedging and accounting adjustments could reduce overall profits by $2.7 billion to $3.7 billion after tax, mostly in its downstream business. Chevron says this impact is temporary and should reverse in the future.

The warning comes after ExxonMobil gave a similar outlook, noting that while higher oil prices could boost earnings, losses from hedging might offset the gains.

Oil prices jumped as much as 65% since the conflict began on February 28, with some Middle East production affected after the Strait of Hormuz was disrupted.

Chevron has relatively low exposure to the Middle East, with the region accounting for just over 1% of its total production. The company expects net oil-equivalent output of 3.8 to 3.9 million barrels per day, factoring in maintenance at Kazakhstan’s Tengizchevroil project and lower production in parts of the Middle East.
Shell also reported challenges in the first quarter, with weaker gas output and short-term liquidity pressures, partially offset by gains from oil trading.

Chevron is set to release its full quarterly results on May 1. Analysts estimate net income around $3.2 billion for the period ending March 31, up slightly from $3.04 billion in the previous quarter. Shares rose about 1% in premarket trading as oil prices climbed.