The North Sea’s prominent energy companies are anticipated to generate substantial profits, driven by a recent surge in oil and gas prices. This escalation is directly linked to the intensifying conflict in the Middle East, which commenced with a joint US-Israeli military offensive against Iran.
Brent crude, the international benchmark for oil, soared above $100 per barrel, briefly touching $119.50 per barrel on Monday, March 9, 2026, marking its highest level since mid-2022. This dramatic price increase follows military actions initiated by the United States and Israel against Iran on February 28, 2026.
The conflict has seen retaliatory missile and drone strikes from Iran across the region, including attacks on UK bases in Bahrain, Qatar, and Cyprus.
Further exacerbating global energy supply concerns, Qatar, a major liquefied natural gas (LNG) producer, announced on March 2, 2026, that it had halted production due to military attacks on its key facilities, subsequently declaring force majeure on March 4, 2026. Concurrently, UK wholesale gas prices experienced a sharp increase, jumping by approximately 50% on March 2, 2026.
These geopolitical developments are expected to significantly impact the UK economy, with projections of higher petrol prices for motorists and a potential rise in household energy bills.
In response to the volatile economic climate, Chancellor Rachel Reeves delivered her Spring Statement on March 3, 2026, reiterating the government’s focus on economic stability amidst the Middle East conflict. The Chancellor opted to maintain the existing Energy Profits Levy (EPL) on oil and gas firms, a decision that proved unpopular with industry players.
Despite industry lobbying, the EPL, initially introduced in May 2022 by the former Conservative government, was extended in the 2024 Autumn Budget to March 31, 2030, and its rate increased to 38%. This levy also saw the removal of the general investment allowance, though a reduced decarbonisation investment allowance was retained.
City investors have already indicated that certain firms are poised to benefit substantially from the elevated energy prices. Ithaca Energy, part-owned by Israel’s Delek Group (51%) and Italy’s Eni (38%), saw its shares hit a 52-week high, rising 4% to 258.5p on March 9, 2026, up from 222p on February 27, as the company is expected to see a significant uplift in North Sea profits.
Ithaca Energy reported strong operational and financial performance for 2025, with increased North Sea production and confirmed a $500 million dividend target. The company’s UK tax bill for 2025 was an estimated $263 million, below its management guidance. Ithaca continues to advance major developments in the West of Shetland, including the Rosebank field, set for first production in 2026-2027, and the Cambo and Tornado gas fields, reaffirming its commitment to UK operations even amidst the windfall tax regime.
North Sea heavyweight Harbour Energy also reportedly saw its shares rise to 296.2p on March 9, 2026, from 253.4p on February 27. The company’s leading shareholders are reported to include US investment giants EIG and Blackrock.
Harbour Energy’s recent annual results indicated that profits from its UK North Sea operations, managed from Aberdeen, doubled from $0.7 billion to $1.4 billion. Despite this, the company reported a $200 million loss due to a $300 million charge from the windfall tax extension, though this was reportedly outweighed by $700 million in write-downs on assets in North Africa, Mexico, and its carbon capture and storage portfolio.
Harbour also noted generating substantial free cash flow projections, with $0.6 billion expected in 2026, rising to an estimated $1 billion by 2028, and paid out $480 million to investors last year.
The company has undertaken significant job cuts, shedding 100 posts in December and 700 UK jobs since 2023. Harbour expanded its UK North Sea portfolio last year by acquiring interests in the Kraken and Catcher fields through a $170 million purchase from Waldorf Production, which entered administration in 2024.
These assets came with $900m of tax losses the company will be able to use to reduce its taxable profits. This loss relief reflects generous aspects of the North Sea tax regime that are rarely mentioned.
In Case You Missed it:
Harbour made clear that it expected to generate huge amounts of cash from its production before oil and gas prices rose last week.
The increase in the amount of cash generated will support generous payouts to investors by Harbour, who netted $480m in total last year.
Campaigners, such as Friends of the Earth Scotland, have voiced concerns that households face soaring energy bills as “greedy oil giants capitalise on the conflict in the Middle East.” They argue that energy companies are once again making “windfall profits that have caused the cost-of-living pain and suffering in the last five years.”
