With options premiums still elevated due to the military conflict in the Gulf, selling puts on an energy major posting record free cash flow offers a rare combination: high probability, real yield, and a worst-case scenario you can live with.

Chevron trades for less than 14 times forward price-to-earnings, generated ~$18 billion-plus in free cash flow in the most recently reported quarter, and ~14% annualized return on a trade with a high probability of profit.

Chevron’s closing stock price today is roughly where it was trading in late 2022/early 2023, despite the company’s better operating results and arguably better outlook. The thesis doesn’t require prices to remain this high, and we certainly hope they don’t. However, based on current indicators, both oil prices and crack spreads are likely to stay elevated, resulting in record free cash flow, a forward multiple below 14 times earnings. The company reported that the $1.5 billion in run-rate synergies from the Hess acquisition are being realized faster than management guided. 

The biggest knock on the story, one I appreciate well as a resident of the state, is outsized exposure to California’s burdensome regulatory environment. The company announced that they are moving their corporate headquarters to Houston from San Ramon, California. They have also announced that they could follow other companies’ lead and close refineries based in Richmond and El Segundo, but at this valuation, I believe one is appropriately compensated for the risk. Moreover, the risk the state faces is arguably larger than that faced by the company. This fact may aid Chevron in finding some compromise if local politicians recognize the risk to residents should refining capacity for the state’s required proprietary blends fall further.

Rather than buying the stock outright, I’d look to harvest the elevated options premiums. Implied volatility in CVX options has been elevated for months — premiums over the past six months are running meaningfully richer than they were in the back half of 2025 due largely to the uncertainty the military conflict in the Gulf and the disruptions in shipping traffic transiting the Strait of Hormuz have created.

Sen. Martin Heinrich will introduce a bill, shared exclusively with CNBC, to end tax breaks for U.S. oil and gas companies that operate overseas while the industry reaps massive profits as the war with Iran spikes oil prices.

The bill comes days after President Donald Trump ripped major U.S. oil and gas producers for making “too much money” amid the conflict that has raised gasoline prices, and warned that companies like ExxonMobil and Chevron are going to have to “give some of that back to the public, and they better cut the retail price, the consumer price.” Trump has, at the same time, pushed U.S. oil and gas companies to invest in Venezuela after he ousted the country’s former president, Nicolás Maduro.

Heinrich, D-N.M., who is the top Democrat on the Senate Energy and Natural Resources Committee, said the bill would “help put American energy development on an even playing field with energy development that’s happening in the Middle East or anywhere else.”

“Oil majors shouldn’t get a tax break for going overseas to produce energy, but that’s essentially what our current tax policy does,” he said. “At a time when oil majors are making billions in profits per quarter, they can afford to pay their fair share.”

According to Heinrich’s office, the bill would eliminate preferential tax treatment for overseas oil and gas extraction income, shifting the tax code so overseas fossil fuel profits are treated the same as other foreign business income.

It would also close tax code provisions that allow companies to generate additional foreign tax credits from shale oil and tar sands development by including them as combined foreign oil and gas income.

The bill would also amend foreign tax credit rules to prevent oil and gas companies from misclassifying payments to foreign governments as taxes rather than royalties so they can reduce their U.S. tax liability, Heinrich’s office said.

Major oil and gas companies around the world posted monster second-quarter profits last week amid the Iran conflict’s surge in crude prices.

Chevron’s net income spiked to $12 billion, a nearly 400% increase compared with $2.5 billion in the same period last year. Exxon, meanwhile, posted profit of $14.5 billion, more than doubling from about $7.1 billion in the same quarter last year.

Gas prices in the U.S., meanwhile, were $4.06 per gallon on Thursday, according to AAA — a major source of voter discontent heading into November’s midterm elections.

Oil rose Friday amid worries over supply disruptions after Iran published a restrictive draft plan for the Strait of Hormuz.

Futures for international benchmark Brent crude for October delivery gained 1.25% to $83.52 a barrel. U.S. West Texas Intermediate futures for September advanced 1.10% at $78.14 per barrel.

“Higher oil prices signaled that a further inflationary impulse from energy and the situation in the Middle East could not be discounted, sending US dollar higher and government bonds lower,” Westpac said in a note.

According to the apparent draft plan published by Iran, the country would ban U.S. and Israeli ships from transiting the Strait. Until compensation is paid, other nations that have harmed Iran would not be allowed to transit, according to the draft.

While Iran and Oman are reportedly working on an agreement to define transit routes in the Hormuz strait, a deal still has not been announced. According to media reports, inbound traffic would transit Iranian waters while outbound traffic would go through Omani waters.

“Adding to supply concerns, Ukraine struck two of Russia’s major oil refineries overnight (Yaroslavl/Yanos and Bashneft’s Novoil facility), and US imports of Saudi crude dropped to zero in July for the first time since 1985,” according to a note by UOB.

Conflicting accounts of bilateral engagement are muddying the progress of a deal to open the Hormuz strait. While U.S. President Donald Trump said in the Oval Office that the Iran will end “pretty soon,” Tehran accused him of staging “theater diplomacy.”

Crude oil prices rose Thursday after Iranian state news published a draft plan with restrictive conditions for ship traffic in the Strait of Hormuz.

Brent crude, the international benchmark, rose 3.6% to $82.36 per barrel. U.S. West Texas Intermediate was up about 2.8% to $77.30.

Prices have fallen about 8% this week after Treasury Secretary Scott Bessent told CNBC on Tuesday that a deal to open Hormuz with freedom of movement could come as soon as Wednesday.

A deal still has not been announced but Iran and Oman are reportedly working on an agreement to define transit routes in Hormuz. Inbound traffic would transit Iranian waters while outbound traffic would go through Omani waters, according to media reports.

But the Iranian state news agency Fars on Thursday published an initial draft plan that placed much more restrictive conditions on ship traffic through Hormuz. The plan is under review by an Iranian parliamentary committee, according to Fars.

Under the apparent draft, Iran would ban U.S. and Israeli ships from transiting the strait. Other nations that have harmed Iran would not be allowed to transit until compensation is paid, according to the draft. Tehran would impose penalties on violators equivalent to 20% of the value of cargo aboard a ship.

Meanwhile, Iran’s Houthi allies in Yemen claimed Thursday to have attacked Saudi troop concentrations there. The Houthis said Wednesday that they struck a Saudi tanker in the Red Sea off the coast from Riyahd’s Yanbu export terminal, which has played a key role in diverting oil shipments.

Another tanker reported hearing two explosions off the coast of Oman while transiting Hormuz, according to a Wednesday incident report from the United Kingdom Maritime Trade Operations Centre. The crew and vessel are safe, according to the UKMTO.

Ukraine’s military on Thursday struck two Russian oil refineries hundreds of miles from its border, Ukrainian President Volodymyr Zelenskyy said, as Kyiv continues to target the country’s energy infrastructure.

Ukraine’s armed forces struck the Bashneft-Novoil refinery in Bashkortostan and the Slavneft-Yanos refinery in the Yaroslavl region, Zelenskyy said.

In a post on social media, Zelenskyy said Ukraine’s long-range sanctions had “once again worked to limit Russia’s oil revenues, which it uses to finance the war and the killing of Ukrainians.”

The Slavneft-Yanos facility in Yaroslavl, which is situated hundreds of miles from the Ukraine border and about 170 miles (274 kilometers) northeast of Moscow, is one of Russia’s biggest oil refineries. It has previously been targeted by Ukraine’s military throughout the conflict.

The facility employs more than 3,500 people and makes about 15 million tons of crude oil each year, according to its website. Its products include fuel for cars, jet fuel and a wide range of oils.

Mikhail Evraev, governor of the Yaroslavl region, said on Thursday that the region had faced its largest-ever drone attack, with air defense and electronic warfare destroying 93 drones.

“Falling debris hit the oil refinery’s storage tanks. Emergency services are working to extinguish the fire,” Evraev said via Telegram. There were no casualties, but four people sustained injuries, he added.

Alongside mid- and long-range drone attacks on energy infrastructure, Ukraine has stepped up attacks on Russia’s Amazon-style retail giant Wildberries in recent weeks, seeking to squeeze a critical piece of Russia’s consumer economy and create a new pressure point for President Vladimir Putin.

Russian forces, meanwhile, have increased the number of missile strikes on Ukrainian cities, likely seeking to exploit Kyiv’s shortage of ballistic missile interceptors.

Ukraine’s Zelenskyy also said the country’s armed forces had responded to Russian attacks on ships in the Black Sea by striking two military patrol boats and shadow fleet vessels.

One person was killed and three others were injured in a Russian attack on a foreign-flagged ship loaded with Ukrainian wheat in the Black Sea, according to Odesa regional governor Oleh Kiper.

A fire broke out on the Guinea-Bissau-flagged ship, Kiper said via Telegram on Thursday, and the crew was evacuated.

Crude prices were little changed Wednesday on reports that the U.S., Iran and Oman were working on an agreement to manage ship traffic in the Strait of Hormuz.

Brent crude, the international benchmark, was up 7 cents at $79.43 per barrel. U.S. West Texas Intermediate futures traded 50 cents lower to $75.27.

The U.S., Iran and Oman are negotiating an interim deal in which inbound ships would transit Iran’s territorial waters while outbound ships would sail through Oman’s waters in coordination with Tehran, two regional sources told Axios.

President Donald Trump told Fox News late Tuesday that the negotations went all day long. “It looks like things are very good,” Trump said.

Treasury Secretary Scott Bessent told CNBC Tuesday morning that a deal to unlock the waterway — a vital transit route for oil, gas, fertilizer and other industrial products — could be reached this week.

Prices briefly moved higher after Iran’s Houthi allies in Yemen said they hit a Saudi tanker with a missile near the coast of Yanbu, a major port for Riyadh’s crude oil exports in the Red Sea.

The U.S and Iran signed a memorandum of understanding on June 17 to open Hormuz, but the deal quickly collapsed as fighting erupted over the route ships take through the strait.

Tehran attacked ships sailing along Oman’s coast under U.S. military protection, in an effort to force vessels to transit its territorial waters. Washington retaliated with more than a dozen waves of airstrikes and the reimposition of its naval blockade against Iran.

Britain’s BP on Tuesday reported a sharp upswing in second-quarter profit, as energy supermajors reap massive profits from higher fossil fuel prices amid hostilities between the U.S. and Iran.

The oil giant posted underlying replacement cost profit, used as a proxy for net profit, of $5.7 billion for the April to June period. That comfortably beat analyst expectations of $5 billion, according to an LSEG-compiled consensus.

BP’s net profit came in at $2.35 billion over the same period last year and $3.2 billion for the first three months of 2026.

The results come as oil and gas prices have surged amid the sprawling Middle East conflict. The fighting has severely disrupted shipping through the strategically vital Strait of Hormuz, a narrow maritime choke point that typically handles around a fifth of the world’s oil and natural gas.

U.S. President Donald Trump on Monday lashed out at U.S. oil majors Exxon Mobil and Chevron for making “too much money” off higher fuel prices amid the Iran war, reiterating his demand for lower prices at the pump.

“They’re making too much money based on a shortage,” Trump told reporters at the White House. “I don’t like it.”

Key highlights from Q2:

• BP increased its dividend by 4% to 8.66 cents per ordinary share for the second quarter.
• Operating cash flow came in at $10.9 billion after taking into account a $1 billion adjusted working capital build.
• Net debt came in at $22.25 billion at the end of the second quarter, down from $25.3 billion at the end of March.

Exxon’s second-quarter profits more than doubled to $14.5 billion compared to a year ago, while Chevron’s earnings soared by nearly 400% to $12 billion compared to $2.5 billion in the same period last year. CNBC has reached out to Exxon and Chevron for comment.

BP CEO Meg O’Neill said the second-quarter results were underpinned by a strong performance across the group and responded to Trump’s criticism of Big Oil.

“Look, I understand the pressure that the ordinary household feels when they pull into the service station to fill up and see the prices. The reality is we produce a global commodity and the prices for the product we sell hangs off that global commodity price,” O’Neill told CNBC’s “Squawk Box Europe” on Tuesday.

“What BP is doing is making sure that we are focused on the things we can do to try to help address the situation. We’re driving hard on reliability, both on our upstream assets where we produce those barrels and the refining assets where we refine them.”

O’Neill said the company had made adjustments to how the firm’s refining runs are set up to maximize the availability of products consumers most need at any point in time, citing jet fuel and diesel as an example.

BP said Tuesday it had launched the process to market Archaea Energy for a potential sale. The company had bought the U.S. biogas business for $4.1 billion in…

Saudi Aramco on Tuesday reported a jump in second-quarter profit, following a period of severe disruption through the Strait of Hormuz amid the sprawling Middle East conflict.

The world’s largest oil company posted adjusted net income of 125.2 billion Saudi riyal ($33.4 billion) over the April to June period, beating analyst expectations of $31.59 billion.

The results come as oil supermajors have reported blowout quarterly profits, benefitting from higher fossil fuel prices amid hostilities between the U.S. and Iran.

The more than five-month-old conflict, which was already expanding beyond its main fronts, has embroiled further countries in the Middle East in recent days, notably the likes of Iraq and Egypt.

Aramco has responded to the Iran war by leveraging its 1,200-kilometer (746 miles) East-West pipeline to the Red Sea, bypassing the Strait of Hormuz, to maintain exports at a maximum capacity of 7 million barrels per day.

Key highlights from Q2:

• Cash flow from operating activities came in at $25.4 billion in the second quarter.
• Gearing ratio of 6.2% at the end of June, compared to 4.8% at the end of the first quarter.
• Aramco said it continues to utilize its East-West pipeline to increase supply flexibility.

“Despite the unprecedented supply disruption through the Strait of Hormuz, we continued to demonstrate our ability to maintain business continuity by capitalizing on our diverse asset base and multi-decade planning, including strategic infrastructure such as the East-West Pipeline, storage capacity, and export terminals,” Aramco President and CEO Amin H. Nasser said in a statement.

“That enabled us to sustain production and exports while advancing key projects, despite the challenging regional environment,” he added.

Aramco’s board said a second-quarter base dividend of $21.9 billion would be paid over the next three months.

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