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Eighteen days into the war in Iran, and the scorecard for global equity markets makes for uncomfortable reading.

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European benchmark indices have shed around 7% since hostilities began — the Euro STOXX 50 down 6.5%, Germany’s DAX off 7%, France’s CAC 40 down 7.2%, and Italy’s FTSE MIB lower by 6.4% — dwarfing the more modest 2.5% decline in the US S&P 500, which benefits from America’s status as the world’s largest oil producer and its relative insulation from the energy shock.

Yet the headline numbers tell only half the story.

Beneath the surface, an extraordinary divide has opened up — between European companies that thrive on expensive energy, and those being crushed by it.

The energy shock reshaping the continent

The conflict’s most immediate economic consequence has been a seismic repricing of energy.

Iran’s effective closure of the Strait of Hormuz — through which 20% of the world’s petroleum flows — caused Brent crude to surge from around $70 to nearly $120 per barrel within days.

As of Tuesday, Brent sits at approximately $105, a 42% rally from pre-war levels.

In an attempt to cap the oil price surge, the International Energy Agency coordinated a historic intervention.

More than 30 nations in Europe, North America, and northeast Asia agreed to release a combined 400 million barrels of oil from emergency reserves — the largest such action in the IEA’s 50-year history.

Yet the oil market has sent a clear signal that even this enormous release is nowhere near enough to address the unprecedented supply disruption, with crude prices surging more than 17% since the announcement.

Natural gas has been hit even harder. The Dutch TTF benchmark — Europe’s most important gas price reference — has surged 60% to €52 per megawatt-hour.

In a note this week, Goldman Sachs energy analyst Samantha Dart warned this week that approximately 80 million tonnes per annum of LNG supply — 19% of the global total — is currently offline following the Strait’s disruption and the shutdown of Qatar’s LNG production facilities.

Her team maintains a TTF forecast of €63/MWh for the second quarter of 2026, warning that tightening European physical balances could push prices into the gas-to-oil switching range before the conflict resolves.

The winners: Energy, renewables and fertilizer

The clearest beneficiaries have been European oil and gas producers, whose revenues move in lockstep with the commodity the war has repriced so dramatically.

Norwegian energy giant Equinor has surged 23.7% since the start of the month, as investors pile into one of the continent’s largest oil and gas producers with substantial assets well outside the conflict zone.

Fellow Norwegian producer Vår Energi is up 19.9%, while Aker BP has gained 17.1%. Italy’s Eni is up 14.7%, and Portugal’s Galp Energia has added 13.6%.

The most striking gains, however, have come from an unexpected corner: biofuels.

German renewable fuels producer Verbio SE has shot up 30.4%, and Finland’s Neste Oyj — the world’s largest producer of renewable diesel — has gained 28.1%.

As conventional fossil fuels become more expensive and supply chains more precarious, energy alternatives become dramatically more attractive to both buyers and investors.

German gas utility Uniper SE, which has spent recent years diversifying away from Russian supply, has rallied 19.1%.

The fertiliser sector has also attracted significant gains, with K+S rising 15.3% and Yara International rising 15.0%.

The moves reflect a commodity supply crisis hiding in plain sight: around one third of global seaborne fertiliser trade — roughly 16 million tonnes — passes through the Strait of Hormuz, including 43% of seaborne urea exports, 44% of sulphur, and over a quarter of traded ammonia.

The losers: Steel, airlines and construction

On the other side of the ledger, the losses have been equally dramatic. Energy-intensive industries and businesses exposed to higher costs with little pricing power have been savaged.

Airlines have taken some of the heaviest punishment. Wizz Air — the Budapest-based low-cost carrier with heavy exposure to Central and Eastern European routes — has collapsed 31.2%.

Air France-KLM has lost 22.1% and easyJet has dropped 21.8%. All three face the same brutal arithmetic: jet fuel costs have surged, hedging programmes offer only partial and temporary protection, and there is limited ability to pass costs on to passengers quickly enough to protect earnings.

Steel producers have been hit with similar force. Salzgitter has fallen 27.9%, thyssenkrupp is down 27.3%, and ArcelorMittal has shed 19.1%, joined by stainless steel specialist Aperam, which has dropped 24.5%.

Steel production ranks among the most energy-intensive industrial processes on earth, and mills operating on thin margins face an immediate profitability crisis when gas prices surge 60% in such a short period.

Spanish engineering contractor Técnicas Reunidas has dropped 23.7%, a casualty of its deep exposure to Middle Eastern energy infrastructure projects now thrown into uncertainty by the conflict.

Construction group Webuild has fallen 26.6%, reflecting broader fears that an energy-driven slowdown will freeze infrastructure investment across Europe’s most exposed economies.

Mining company Hochschild rounds out the list, down 21%, rising energy costs compress margins and risk appetite for smaller extractive names evaporates.

Europe enters this crisis in a structurally vulnerable position.

Despite having dramatically reduced its dependence on Russian pipeline gas since the invasion of Ukraine, the continent remains acutely sensitive to energy supply disruptions — and gas storage levels heading into 2026 offer less of a buffer than in prior years.

SACRAMENTO — A corporate tax policy that costs California billions in lost tax revenue each year could be coming to an end as the state struggles to backfill federal cuts and resolve a looming budget deficit.

The proposed legislation, Assembly Bill 1790, would repeal the so-called “water’s edge” tax break, a filing option that allows multinational corporations to exclude the income of their foreign subsidiaries from state taxation.

“The tax bills of the wealthiest, most powerful corporations in the world are at all-time lows,” Assemblymember Damon Connolly (D-San Rafael), one of the primary sponsors of the bill, told The Times. “Meanwhile, we’re struggling to fund programs that feed children — I think everyone understands that now is the time for long-term budget solutions.”

Republican Sen. Roger Niello, vice chair of the Senate Budget and Fiscal Review Committee, said the bill to repeal water’s edge won’t receive support from GOP lawmakers. He said the legislation would lead to double taxation, meaning the same income would be taxed twice by different countries, and compared taxing corporations’ foreign profits to enacting tariffs.

“California already has the reputation of being not particularly business friendly,” said Niello (R-Fair Oaks). “This would really just compound that.”

A spokesperson for Gov. Gavin Newsom did not respond to a request for comment about the governor’s views on the proposal. Newsom, however, has largely shunned new tax increase proposals.

Legislation to increase taxes requires a two-thirds approval vote instead of a simple majority. Democrats in California hold a supermajority in both the Assembly and Senate, meaning the bill could still pass without Republican support, but it would require backing from the progressive and moderate wings of the party.

Kayla Kitson, a senior analyst at the California Budget and Policy Center, said the measure has a decent chance of winning support among moderate Democrats due to the state’s budgetary woes.

“The stakes are really high this year,” she said. “With any tax policy, it’s certainly hard to get folks beyond the progressive community on board, but there are a lot of discussions happening behind closed doors given the challenges that the state knows it’s going to have to deal with in the next few years.”

When filing taxes, a multinational corporation in the United States can currently choose between two methods. Worldwide reporting takes into account all of the corporation’s global profits or losses, while the water’s edge option allows the U.S.-based parent company to exclude the income of foreign subsidiaries. This can help corporations that own profitable foreign companies pay less taxes in the United States.

California is scrambling for solutions as the state is facing an estimated $18-billion budget deficit and fallout from federal cuts that slashed healthcare. A Republican-backed tax and spending bill signed last year by President Trump shifted federal funding away from safety net programs and toward tax cuts and immigration enforcement.

Carl Davis, a research director for the Institute on Taxation and Economic Policy, said the idea is picking up momentum nationwide, with states like Maryland, Minnesota and New Hampshire also considering a repeal in recent years, due to a growing awareness about profit shifting — a loophole in the water’s edge tax break that some corporations use to reduce their tax burdens by shifting profits made in a high-tax country into tax havens.

“Folks are outraged when they hear that these companies are pretending that they are earning their profits in the Caymans or in Switzerland and are skipping out on paying U.S. taxes as a result,” he said. “That feels insulting to a lot of people who are paying the taxes they owe every day.”

During an informational hearing at the Legislature last month, Rowan Isaaks, an economist with the nonpartisan Legislative Analyst’s Office, said the state does not know the extent to which corporations use profit shifting, which makes it impossible to determine exactly how much revenue California would gain by eliminating the water’s edge tax exemption. But he estimated it would bring in “single digit billions” for the state each year.

“While there would be revenue gains, the Legislature also faces a trade-off between broadening the tax base but also managing additional uncertainty,” said Isaaks, explaining it could increase budget volatility because foreign income is more sensitive to global economic conditions.

Issaks added that the Legislative Analyst’s Office has found no strong evidence that companies would flee California if the water’s edge tax break was repealed.

Jennifer Barton, director of the legislative services bureau for the California Franchise Tax Board, told legislators that mandating worldwide reporting wouldn’t be difficult for the state from an administrative standpoint, only requiring some additional outreach or educational efforts.

California Tax Foundation visiting fellow Jared Walczak said that the water’s edge option exists for a reason and that it would be unfair to mandate worldwide reporting. “The vast majority of the activity abroad is true economic activity abroad,” he told lawmakers. “Companies don’t just exist in the United States; they have sales, they have manufacturing, they do things abroad.”

A survey last year from the nonpartisan Pew Research Center found 63% of adult Americans believe large corporations or businesses should pay more in taxes, while 19% want corporate taxes to be lower and 17% believe corporate tax policy should remain the same.

Tech companies appear to be particularly aggressive with profit shifting. Six U.S. multinational corporations — Apple, Cisco, EBay, Facebook, Google and Microsoft — may have underpaid their U.S. corporate income taxes by $277 billion over varying periods from 2009 through 2022, according to a report from the Center on Budget and Policy Priorities.

Repealing the water’s edge tax break isn’t the only tax-related proposal being considered as the state seeks to increase revenue. The Billionaire Tax Act is a controversial proposed state ballot initiative that would levy a one-time, 5% tax on the state’s billionaires to help offset federal cuts. Newsom is among its critics.

Davis believes it will continue to be a hot topic regardless of the bill’s outcome this year.

“There is very good reason to think this [repeal] is going to happen at some point,” he said. “This is a debate that is certainly not going away.”