MW Energy prices have probably peaked. What that means for stocks, according to Morgan Stanley's Mike Wilson.
By Barbara Kollmeyer
A train of tank cars enters the Chevron EL Segundo refinery, one of the largest petroleum processing facilities in California, on April 8, 2026, in El Segundo. Energy prices have probably peaked, says Morgan Stanley.
While investors are fixated on when energy flows will resume and normalize in the Strait of Hormuz, oil markets themselves may be signaling peak worry time is over.
That's according to a team at Morgan Stanley, led by chief U.S. equity strategist Mike Wilson, who flagged a potential peak in the price difference between Brent and WTI oil contracts. "In short, once that spread peaks, it typically signals the end of the price spike in Brent oil, which is more affected than WTI."
Up about 82% year to date, Brent (BRN00) is seen as more directly impacted by the Iran conflict, but has also traditionally traded at a higher price point than West Texas Intermediate crude (CL.1), up 68%. Since the conflict began, the price spread between the two reached a high of $13.96 on March 20, according to Dow Jones Market Data. As of Monday, WTI was trading at a $2.06 premium over Brent.
"We have compared the peak rate of change in oil prices to the peakrate of change in trade uncertainty a year ago, which also marked the low for equities before the coast was clear," Wilson and the team said in a Sunday note. They noted that companies and markets also moved from last year's tariff crisis, even if they weren't fully repealed and remain high.
"We suspect it's similar today with oil prices. We also contend that the global economy is a lot more resilient than many give it credit for and it has a way of managing such bottlenecks better than one might think," they said. "This time it's no different as shippers and buyers of crude get creative."
Brent and WTI prices were up around 8% each on Monday after failed talks between the U.S. and Iran over the weekend, and President Donald Trump's plan to blockade any ships trying to exit or enter the Iran-controlled Strait of Hormuz.
The Morgan Stanley strategists said industries and economies also get creative when they have to, such as four years ago, when the Nord Stream pipeline was destroyed and Germany managed to rebuild its LNG plants within months.
"We would not bet against that ingenuity and flexibility this time either," they said.
Stocks in the energy sector, meanwhile, were outperforming well before the U.S. and Israel began attacking Iran on Feb. 28. "From an equity standpoint, energy stocks' relative performance also appears to have peaked and turned lower. Thus, the market is signaling lower oil and gas prices between today and year end, and perhaps materially so."
"We would be fading energy stocks here with a focus on refiners over E&P and services," said Wilson and the team.
A pure play on refiners is VanEck Oil Refiners ETF CRAK; the iShares U.S. Oil & Gas Exploration & Production ETF IEO is aimed more at exploration and production; and the State Street Energy Select Sector SPDR ETF XLE is a mix.
Wilson and his team reiterated their view that the S&P 500 SPX has been carving out a low after holding the lower end of their 6,300 to 6,500 range. "So far, so good with the S&P 500 up another 3.5% last week and 7% from the lows just two weeks ago."
They suggested a barbell of cyclicals, featuring strong earnings and compressed valuations, such as in financials, industrials and consumer-discretionary goods.
"With peace talks stalling over the weekend and central banks remaining focused on inflation risk, equity markets may need to back and fill and even retest our targeted range again. That said, our advice is to be ready to add risk into this, because the market waits for no one."
-Barbara Kollmeyer
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(END) Dow Jones Newswires
April 13, 2026 07:02 ET (11:02 GMT)
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