Europe Faces Renewed Push for Windfall Taxes as Energy Giants Reap Massive Profits from Middle East Turmoil

European governments are once again facing mounting pressure to impose windfall taxes on oil and gas companies after the continent’s biggest energy firms posted soaring first-quarter profits driven by the Middle East conflict and the resulting spike in global energy prices.

Major European energy companies benefited heavily from volatility in oil markets following disruptions linked to the war involving Iran. The instability sent crude prices sharply higher and created lucrative trading conditions for firms with extensive global energy operations.

Shell plc reported a 24% increase in first-quarter profits on Thursday, while rival BP also announced stronger earnings last month. Meanwhile, France’s TotalEnergies revealed that its net profit surged 51% to $5.8 billion during the same period.

Market analysts expect the sector’s earnings momentum to continue throughout the year.

According to anti-poverty organization Oxfam, six of the world’s largest fossil fuel companies — Chevron, Shell, BP, ConocoPhillips, ExxonMobil and TotalEnergies — are projected to generate an additional $37 million (€31.5 million) per day in 2026 compared with 2025.

The conflict involving Iran severely disrupted shipping through the Strait of Hormuz, one of the world’s most critical arteries for oil and gas transportation. The instability triggered extreme swings in global oil prices.

Brent crude, the international benchmark for oil prices, climbed to approximately $100 per barrel during the conflict and briefly exceeded $126 a barrel. Before fighting erupted in late February, prices had hovered around $70.

The volatility proved especially profitable for European oil majors such as BP, Shell and TotalEnergies, all of which operate substantial energy trading businesses. Their American counterparts, including ExxonMobil and Chevron, remain more heavily dependent on direct oil and gas production.

“BP, Shell and Total benefited not only from higher oil prices, but also from the market turbulence itself,” said Stephen Innes of SPI Asset Management.

“The European majors looked less like traditional oil companies this quarter and more like sophisticated volatility traders operating inside the global energy system,” he added.

The surge in profits has reignited political debate across Europe over whether energy companies should face additional taxation similar to the emergency measures introduced after Russia’s invasion of Ukraine in 2022.

In early April, the governments of Germany, Austria, Spain, Italy and Portugal jointly called on the European Commission to establish an EU-wide tax targeting excess profits earned by energy companies during the Iran-related oil shock.

The five countries argued that the proceeds from such a levy could help finance support measures for consumers, combat inflation and reduce strain on public finances.

The discussion intensified further after the latest earnings announcements from major energy firms.

“Once again, the fossil fuel giants are raking in massive profits,” said Danny Gross of Friends of the Earth, who urged governments to impose higher taxes on the sector.

In the United Kingdom, companies producing oil and gas in the North Sea are already subject to the Energy Profits Levy, a temporary windfall tax first introduced in 2022.

The levy currently stands at 38% and is scheduled to remain in place until 2030, in addition to existing taxes on the sector. However, the measure only applies to profits generated from UK oil and gas production.

Following the latest earnings surge at Shell and BP, calls have emerged to increase the levy further. UK Energy Minister Ed Miliband criticized what he described as “excessive profits” earned by the companies.

In France, Socialist and Green lawmakers submitted legislation in April proposing a windfall tax on energy company earnings.

French Prime Minister Sébastien Lecornu stated that he had “no objection in principle” to taxing what he called “exceptional” profits, although he stopped short of endorsing a coordinated European-wide initiative, according to Le Monde.

French President Emmanuel Macron has also advocated for a broader European response to what he characterized as excessive profits and speculative behavior within energy markets.

Industry observers believe the world’s largest energy companies are likely to continue posting robust earnings during the second quarter.

“Even if tensions ease, markets do not suddenly snap back to normal overnight,” observed Innes.

“I am not sure this conflict will get resolved that easily,” said Adi Imsirovic, senior lecturer in energy systems at University of Oxford. He warned that prolonged instability could keep oil prices elevated for an extended period.

Such conditions are expected to encourage additional investment in new oil and gas developments, particularly smaller projects capable of entering production quickly — an approach already being considered by TotalEnergies.

Innes argued that companies are more likely to prioritize inexpensive and adaptable projects rather than embark on aggressive large-scale expansion programs.

“The winners will likely be the projects that are low-cost, flexible, and geopolitically secure, rather than massive expansion for expansion’s sake,” he said.

Over recent years, both BP and Shell have weakened several climate commitments in favor of maintaining oil and gas production.

More recently, TotalEnergies announced that it could no longer fully commit to its target of achieving carbon neutrality by 2050, arguing that the global economy was still not prepared to move beyond oil dependence.

At the same time, the conflict has renewed debate over the importance of renewable energy in strengthening long-term energy security.

“This has not gone unnoticed in all capitals across the globe,” said Imsirovic.

By fLEXI tEAM