As tensions persist in the Strait of Hormuz, international oil prices are facing structural upward pressure. Against this backdrop, two energy giants, ExxonMobil (XOM) and Devon Energy (DVN), are poised to achieve substantial free cash flow growth by the end of 2026.
The Strait of Hormuz is one of the world’s most vital oil transport routes, handling approximately 20% of global oil supplies. Iran’s Islamic Revolutionary Guard Corps has recently made its position clear, stating its intention to prevent oil shipments through the strait. This强硬 stance makes persistently high oil prices a high-probability event. Currently, crude oil prices have risen to $99 per barrel, with no signs of abating.
Major financial institutions generally hold an optimistic outlook on oil price trends. Barclays predicts oil prices will remain at the $85 per barrel level, Goldman Sachs has raised its forecast to $71, while Macquarie Group has made a bold prediction of $150 per barrel. Analysts believe this oil price increase is not a short-term fluctuation but is supported by three structural factors: Firstly, the tension in the Strait of Hormuz differs from a quickly repairable pipeline failure; commercial shipping and insurance markets have begun to withdraw from the area, and even if tensions ease, normalizing tanker routes and insurance costs will take months. Secondly, the limited capacity of strategic petroleum reserves constrains the scope for policy responses.
In this context, ExxonMobil demonstrates strong profitability. The company’s current stock price is $156.12, up 30% for the year. It’s noteworthy that even with average crude oil prices in 2025 well below $90 per barrel, the company still generated $23.6 billion in free cash flow for the full year. In 2025, the company achieved record oil and gas production of 4.7 million barrels of oil equivalent per day, with high-quality assets in the Permian Basin, Guyana, and LNG contributing 59% of that production. The Golden Pass LNG project is expected to achieve its first cargo in the first quarter of 2026, adding a new source of high-margin revenue at an optimal time. Regarding shareholder returns, the company maintains a quarterly dividend of $1.03 per share, marking the 43rd consecutive year of dividend growth, with a dividend yield of 2.64% based on the current stock price.
Devon Energy is also performing strongly, with shares trading at $46.25, a year-to-date increase of 30%. Its trailing P/E ratio is 11 times, and the analysts’ consensus target price is $51.50. The company’s merger with Coterra Energy, expected to close in the second quarter of 2026, serves as a near-term catalyst for share price appreciation. Under the agreement, Devon Energy shareholders will hold approximately 54% of the combined entity, and the transaction is projected to generate $1 billion in annual pre-tax synergies. Post-merger, the company’s quarterly dividend is expected to jump by 31% to $0.315. Devon Energy’s standalone free cash flow for 2025 reached $3.12 billion, a 465% increase year-over-year—a performance also achieved when oil prices were significantly below $90 per barrel.
Analysts point out that if oil prices fall back below $90 per barrel and remain low, both companies would face profitability pressures. However, considering the structural impact of the Strait of Hormuz situation on tanker transportation, the limitations on strategic petroleum reserve capacity, and the fact that both companies have already generated record cash flows at lower oil price levels, both are poised for considerable earnings growth potential in the second half of 2026 if oil prices remain high.
