Baker Hughes CFO Warns of Further Middle East Revenue Decline

Baker Hughes' CFO, Ahmed Moghal, has projected that the company's oilfield services and equipment (OFSE) revenue in the Middle East could fall by more than 20% sequentially in the second quarter, even under the assumption that the US-Israel war with Iran resolves by June. This decline would be double the rate of the first quarter's 7% drop, which was driven by regional volatility. Despite this, the company maintains its full-year 2026 guidance, supported by strength in its industrial and energy technology (IET) segment, though results are expected to be slightly below the midpoint of guidance ranges.

Geopolitical Risk as a Structural Reality

CEO Lorenzo Simonelli emphasized that the conflict has introduced a "meaningful new layer of macro uncertainty" for energy markets, making geopolitical risk a "structural reality" for oil and gas. This has significant consequences for supply reliability and global energy security. Liquefied natural gas markets face a potential supply shortfall this year due to the Strait of Hormuz chokehold and infrastructure damage in the Middle East.

Future Energy Security and Investment Priorities

Simonelli noted that energy security will become a "foundational priority" for governments and industries worldwide. This will likely drive diversification of oil and gas supply sources, as well as increased investment in geothermal, nuclear, and other power sources. To address energy challenges, global players must boost upstream investments to expand production capacity, meet rising demand, and rebuild inventories after major drawdowns. Such investments could increase orders for Baker Hughes' IET segment.

Post-Conflict Recovery Expectations

Once the conflict ends and the Strait of Hormuz is fully opened, Baker Hughes expects a "measured increase" in Middle East activity, led by remediation and intervention work to bring previously shut-in wells back online. The pace of regional activity will depend on producers' ability to restore export flows.