The Middle East conflict has triggered unprecedented turbulence in oil markets, lifting shares of European energy companies expected to benefit from rising crude prices, while other stocks lag behind. Although the outcome largely hinges on how the Iran conflict evolves, investors have so far flocked to firms that stand to gain from improved European refining margins and higher prices for refined products. Since the outbreak of hostilities, the energy sector of the STOXX Europe 600 Index has climbed 6%.
Analysts at Berenberg Bank, including Henry Tarr, noted in a report: "While almost all companies in the sector will benefit, relative performance within the energy sector depends partly on the conflict’s outcome and its impact on various commodities." However, across the broader European energy sector, some stocks are facing selling pressure. Shares in infrastructure firms with significant operations in the region have declined, and some renewable and clean energy stocks have also fallen, as these companies would suffer from rising inflation and borrowing costs.
With few signs of de-escalation and Brent crude hovering around $106 per barrel, here is how energy-related stocks are performing:
**Oil and Gas Stocks** Spanish energy firm Repsol is a top pick for Berenberg Bank. Analysts suggest that even after the conflict ends, oil prices may remain elevated due to refinery disruptions, from which the Spanish oil and gas company could benefit. Repsol has no production operations in the Middle East. Other companies with minimal or no exposure to the region, including Norway’s Equinor and Portugal’s Galp Energia, posted double-digit percentage gains by the end of last week.
Simon Wong, portfolio manager at Gabelli Funds, noted that Equinor and Repsol are relatively unhedged, allowing them to capture more upside from rising energy prices. In contrast, firms with substantial regional operations help explain divergent stock performance. For instance, TotalEnergies, the Western energy major with the largest exposure to the Gulf region according to industry research, saw its shares only slightly outperform the broader market. The French company has significant operations in Qatar, home to the world’s largest liquefied natural gas export facility, which is currently shut down. With European gas storage at around 30% capacity, demand for LNG imports before next winter has increased.
**Alternative Fuel Stocks** The crisis has driven up prices for fossil fuel alternatives. Shares in Finnish renewable diesel and aviation fuel producer Neste Oyj have surged 28% since the fighting began. This boost could persist even after hostilities cease if refineries in the region remain offline. Florence Schmit, energy strategist at Rabobank, stated: "Once the issues are resolved, you can’t simply restart them. This will clearly further delay the volume of production that can come to market."
**Renewable Energy Stocks** Prospects of supply chain disruptions, coupled with rising inflation and interest rates, have heightened concerns about renewables. Although Jefferies advised global clients not to panic, the sector has so far significantly underperformed its fossil fuel peers in Europe. Vestas Wind Systems and Nordex are among the laggards. Worries are mounting that higher inflation and borrowing costs will pressure capital-intensive renewable energy developers and equipment manufacturers. A similar scenario in 2022 triggered a selloff that lasted into 2025.
Siemen Energy’s shares are near the bottom of the energy subsector. The company, which supplies power for AI hyperscalers, faces execution risks on large projects "if geopolitical tensions cause delays in project awards or financing across the Middle East," according to analyst Omid Vaziri. Looking further ahead, Gabelli Funds research analyst Jens Zimmermann said he does not expect investors to lose interest in renewables, as the Middle East crisis highlights Europe’s dependence on imported fossil fuels.
**Oil Services Stocks** Oilfield services stocks have underperformed, as operational risks in the Middle East outweigh the long-term benefits of higher oil prices. Italy’s Saipem and Subsea 7, which are moving toward a merger, both have involvement in the Middle East through offshore engineering and subsea contracts. According to Arctic Securities, about a quarter of Saipem’s order backlog is tied to the region, while roughly 10% of Subsea 7’s backlog, including a contract with Saudi Aramco, is in the area. Shares in both Subsea 7 and Saipem fell 6%.
"Traders are concerned that contracts with Middle Eastern companies could be canceled or that force majeure may be declared," said Arctic Securities analyst Lukas Daul. "Higher energy prices also benefit oil services firms, but with all the uncertainty, oil majors certainly aren’t investing right now."
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