The first quarter of this year has delivered a financial bonanza for Europe's largest oil and gas companies, as disruptions from the Iran conflict sent energy prices soaring. Shell reported a 24% rise in quarterly profit, BP saw similar gains, and TotalEnergies announced a 51% jump to $5.8 billion. These results have reignited a political debate across the continent: should governments impose a windfall tax on such outsized earnings?
The surge in profits stems directly from the war in the Middle East, which disrupted shipping through the Strait of Hormuz—a critical chokepoint for global oil supplies. Brent crude briefly topped $126 a barrel during the conflict, compared with around $70 before hostilities began in late February. While higher prices boosted revenues for all producers, European majors like BP, Shell, and TotalEnergies benefited disproportionately from their large trading operations. As Stephen Innes of SPI Asset Management put it, these companies "looked less like traditional oil companies this quarter and more like sophisticated volatility traders operating inside the global energy system."
Renewed Momentum for Windfall Taxes
The strong earnings have revived calls for windfall taxes reminiscent of those introduced after Russia's invasion of Ukraine in 2022. In early April, Germany, Austria, Spain, Italy, and Portugal jointly urged the European Commission to create an EU-wide levy on excess profits from energy companies during the Iran-related oil shock. They argued the measure could fund consumer support schemes, curb inflation, and ease pressure on public finances. A month later, after the biggest firms reported their results, the debate intensified.
In the UK, the Energy Profits Levy—a temporary windfall tax introduced in 2022—currently stands at 38% until 2030, applying only to profits from UK oil and gas production. The latest profit surge at Shell and BP has prompted renewed calls to increase the levy. UK Energy Minister Ed Miliband criticised what he called "excessive profits." Meanwhile, in France, Socialist and Green MPs submitted a bill in April proposing a windfall tax on energy company profits. Prime Minister Sébastien Lecornu told Le Monde he had "no objection in principle" to taxing "exceptional" profits, though he stopped short of backing coordinated EU-wide action. President Emmanuel Macron has called for a European response to what he described as excessive profits and speculative behaviour in energy markets.
Oxfam projects that six of the world's biggest fossil fuel companies—including Shell, BP, and TotalEnergies—could earn an additional $37 million (€31.5 million) a day in 2026 compared with 2025. Danny Gross of Friends of the Earth said, "Once again, the fossil fuel giants are raking in massive profits," urging higher taxes on the sector. The debate is also playing out in the streets: French farmers recently blocked a refinery in Lyon to protest soaring fuel costs, underscoring the social tensions that high energy prices generate.
Energy Security and the Shift to Renewables
Analysts expect strong earnings to continue in the second quarter. "Even if tensions ease, markets do not suddenly snap back to normal overnight," Innes observed. Adi Imsirovic, senior lecturer in energy systems at Oxford University, added, "I am not sure this conflict will get resolved that easily," suggesting prices could stay higher for longer. That scenario is likely to stimulate new oil and gas projects, as TotalEnergies has envisaged, involving small-scale fields capable of rapid production. Innes believes companies will favour low-cost, flexible, and geopolitically secure projects rather than "massive expansion for expansion's sake."
In recent years, BP and Shell have scaled back several climate targets in favour of continuing oil and gas production. TotalEnergies recently announced it could no longer commit to its 2050 carbon neutrality target, arguing the world is not yet ready to move on from oil. Yet the conflict has also brought the role of renewable energy in energy security back into the spotlight. The EU's climate chief has called for a radical energy shift as the third oil shock bites, and innovations like superhot geothermal energy are gaining attention as potential long-term solutions.
The political calculus around windfall taxes remains complex. While public anger at corporate profits is palpable, governments must balance revenue needs against the risk of discouraging investment in domestic energy production—especially as Europe seeks to reduce its dependence on imported fossil fuels. The coming months will test whether the renewed calls for taxation translate into concrete policy action across the continent.
