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3 Stocks to Watch as Oil Prices Surge After Iran's Attack on Israel
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The Oil/Energy market saw a sharp rise following a significant escalation in Middle Eastern tensions after Iran launched a missile attack on Israel. Despite limited on-the-ground damage and minimal casualties, the move has heightened fears of further conflict that could disrupt global crude supplies.
On Oct. 1, 2024, both WTI and Brent crude experienced notable price gains, driven by escalating tensions in the Middle East. Price for WTI crude surged 2.44%, closing at $69.83 per barrel, while that for Brent crude rose 2.6%, settling at $73.56 per barrel. These hikes were fueled by concerns over potential retaliatory strikes on Iranian oil facilities following a missile attack on Israel. With Iran being a key supplier of oil through the Strait of Hormuz, any disruption in this region could lead to severe global supply constraints, possibly taking more than 1 million barrels per day (bbl/day) offline.
Energy Stocks to Keep an Eye on Amid Geopolitical Tensions
As one of the world’s largest oil producers, XOM is highly sensitive to global oil price movements. The company's vast upstream operations, which spread across the Americas and Africa, make it vulnerable to any supply disruption in the Middle East. Given that oil prices are a critical determinant of ExxonMobil’s revenues, the possibility of reduced global supply could significantly boost its share price.
Higher crude prices generally translate to higher profitability for ExxonMobil’s upstream business, which accounts for a substantial portion of the company’s revenues. Additionally, XOM’s diversified global footprint could serve as a hedge against concentrated regional risks.
Chevron: Leveraging Middle East Exposure
Chevron, another U.S. oil giant, also stands to benefit from rising crude prices. The company has notable exposure to the Middle East, including operations in the Kurdish region of Iraq. While Chevron is not directly involved in Iranian oil production, any disruption in regional supplies could tighten the market, benefiting the company through price increases. Moreover, its upstream business, which has seen consistent performance despite market volatility, would benefit from any sustained uptick in oil prices resulting from geopolitical instability. Higher oil prices could boost the company's cash flows, enabling it to continue rewarding its shareholders through dividends and buybacks.
EOG Resources: Positioned to Gain Profit Amid Rising Prices
EOG is one of the largest independent oil and natural gas companies in the United States, with a focus on exploration and production. With substantial holdings in the resource-rich Permian Basin, EOG is well-positioned to benefit from rising crude prices. Any disruption in global oil supply, particularly from the Middle East, could increase the demand for EOG's output, leading to higher revenues and enhanced profitability. As oil prices rise due to geopolitical tensions, EOG’s operational efficiency and strategic asset base could provide significant upside potential for investors.
Conclusion
The growing tensions in the Middle East following Iran’s missile attack on Israel have already impacted oil markets, driving crude prices higher. As the threat of further conflict looms, investors should closely monitor energy stocks like ExxonMobil, Chevron and EOG, which are poised to benefit from potential supply disruptions. Although the geopolitical landscape remains uncertain, a significant reduction in Iranian oil exports could create opportunities for investors in energy stocks tied to crude prices.
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3 Stocks to Watch as Oil Prices Surge After Iran's Attack on Israel
The Oil/Energy market saw a sharp rise following a significant escalation in Middle Eastern tensions after Iran launched a missile attack on Israel. Despite limited on-the-ground damage and minimal casualties, the move has heightened fears of further conflict that could disrupt global crude supplies.
On Oct. 1, 2024, both WTI and Brent crude experienced notable price gains, driven by escalating tensions in the Middle East. Price for WTI crude surged 2.44%, closing at $69.83 per barrel, while that for Brent crude rose 2.6%, settling at $73.56 per barrel. These hikes were fueled by concerns over potential retaliatory strikes on Iranian oil facilities following a missile attack on Israel. With Iran being a key supplier of oil through the Strait of Hormuz, any disruption in this region could lead to severe global supply constraints, possibly taking more than 1 million barrels per day (bbl/day) offline.
Energy Stocks to Keep an Eye on Amid Geopolitical Tensions
Given the possibility of an escalating conflict, energy stocks linked to the oil supply chain that are likely to be positively impacted are Exxon Mobil Corporation (XOM - Free Report) , Chevron Corporation (CVX - Free Report) and EOG Resources, Inc. (EOG - Free Report) , each carrying a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ExxonMobil: A Major Player With Global Exposure
As one of the world’s largest oil producers, XOM is highly sensitive to global oil price movements. The company's vast upstream operations, which spread across the Americas and Africa, make it vulnerable to any supply disruption in the Middle East. Given that oil prices are a critical determinant of ExxonMobil’s revenues, the possibility of reduced global supply could significantly boost its share price.
Higher crude prices generally translate to higher profitability for ExxonMobil’s upstream business, which accounts for a substantial portion of the company’s revenues. Additionally, XOM’s diversified global footprint could serve as a hedge against concentrated regional risks.
Chevron: Leveraging Middle East Exposure
Chevron, another U.S. oil giant, also stands to benefit from rising crude prices. The company has notable exposure to the Middle East, including operations in the Kurdish region of Iraq. While Chevron is not directly involved in Iranian oil production, any disruption in regional supplies could tighten the market, benefiting the company through price increases. Moreover, its upstream business, which has seen consistent performance despite market volatility, would benefit from any sustained uptick in oil prices resulting from geopolitical instability. Higher oil prices could boost the company's cash flows, enabling it to continue rewarding its shareholders through dividends and buybacks.
EOG Resources: Positioned to Gain Profit Amid Rising Prices
EOG is one of the largest independent oil and natural gas companies in the United States, with a focus on exploration and production. With substantial holdings in the resource-rich Permian Basin, EOG is well-positioned to benefit from rising crude prices. Any disruption in global oil supply, particularly from the Middle East, could increase the demand for EOG's output, leading to higher revenues and enhanced profitability. As oil prices rise due to geopolitical tensions, EOG’s operational efficiency and strategic asset base could provide significant upside potential for investors.
Conclusion
The growing tensions in the Middle East following Iran’s missile attack on Israel have already impacted oil markets, driving crude prices higher. As the threat of further conflict looms, investors should closely monitor energy stocks like ExxonMobil, Chevron and EOG, which are poised to benefit from potential supply disruptions. Although the geopolitical landscape remains uncertain, a significant reduction in Iranian oil exports could create opportunities for investors in energy stocks tied to crude prices.