By David Uberti and Jared Mitovich
Investors are betting big that the largest oil disruption in history might jolt the energy industry out of a yearslong slumber.
The fallout from the war with Iran has rocketed oil prices above $100 a barrel and battered stocks and bonds in recent weeks, but it has also rewarded shareholders of America's oil-and-gas companies -- transforming a flagging industry into one of the market's only havens.
Over the past month, only one grouping within the S&P 500 has traded in the green, and it is energy. Shares in fuel-refiner Phillips 66 and major oil companies Chevron and Exxon Mobil just logged their best quarters on record. The move was enough to push Exxon's forward stock-price-to-earnings ratio to recently top that of market darling Nvidia.
Wall Street's scramble for traditional energy names goes beyond Iran's de facto blockade of the Strait of Hormuz, which is zapping about 10 million barrels of crude from the global economy each day and driving up profits for many oil producers and refiners. Massive drawdowns from strategic stockpiles in the U.S. and elsewhere will need to be replenished. And the recent engine of global production growth, the American shale patch, is showing fresh signs of slowing -- raising the prospects that future supply will be more limited.
U.S. energy stocks have vaulted upward despite white-knuckle moments when oil prices seesawed. In recent days, those same energy shares skidded when it appeared the conflict might be resolved sooner.
On Thursday, though, benchmark U.S. crude futures jumped 11% to $111.54 a barrel, after a national address by President Trump provided little clarity on an exit strategy from Iran or a reopening of the strait.
"The investment thesis gets stronger as [the war] goes along," said Dan Pickering, founder of Pickering Energy Partners, a financial firm. "If the U.S. just leaves, Iran is in charge of the strait. They can turn it off whenever they want."
Traders have also recently bid up the price of oil set to be delivered months in the future, suggesting Wall Street is factoring in a longer-term supply disruption.
"The [futures] curve is moving up because every day you go, the physical market gets tighter," Pickering said.
The recent rally marked a U-turn from just a few months ago, when some analysts projected an oil glut that could push prices as low as $50 a barrel. The outlook suggested another tough stretch for an S&P 500 energy sector that posted negative total returns in four of the past 10 calendar years.
Still, investors have piled in during the war despite a history of overreacting to past geopolitical events.
In 2022, much of the shock to energy supplies following Russia's invasion of Ukraine dissipated by midyear, even though its inflationary effects were felt long after. While Russia's oil production fell by around one million barrels a day in March and April of that year, three-quarters of that production was recovered by June, according to consulting firm Wood Mackenzie.
After a steep run-up in 2022, the S&P 500 energy sector was roughly flat until just before the U.S. and Israel launched strikes on Iran on Feb. 28.
This year, the group has climbed by as much as 40%, raising the stakes for traders gauging whether to take profits now or ride out a conflict in which the price of oil has become an extension of the battlefield between Washington and Tehran.
"We're not necessarily making the case to go out and buy energy stocks at a 40% run," said Jason Pride, chief of investment strategy and research at Glenmede.
"I also wouldn't be surprised if energy stocks don't fully revert to where they were before," Pride said. "We may have been in an environment where markets were a little more complacent with the need for energy within a portfolio of stocks."
The sector spanning integrated oil companies, shale drillers, fuel makers and pipeline operators comprises a small share of the increasingly tech-heavy S&P 500. That means even a relatively small shift in capital could translate to big gains in energy shares.
At the same time, American production growth -- a key shock absorber for high prices after Russia's invasion of Ukraine -- appears to be plateauing. Analysts say the best land for drilling has already been tapped. A more consolidated industry is now focused on shareholder returns over new projects.
After U.S. companies pumped out nearly 13.9 million barrels a day in October, the Energy Information Administration estimated that domestic production fell in each of the next three months, nearing 13.2 million barrels a day in January. More recent weekly data suggests that moderately lower output has continued since.
"This is the wake-up moment for the market that if you have oil that can be produced in 2040, that's going to be valuable," said Tyler Rosenlicht, head of natural resource equities at Cohen & Steers.
But even bullish investors expect more turbulence along the way. "If we get some resolution to the conflict, you could see a 10% to 20% pullback in energy stocks," said Matt Portillo, head of research at TPH&Co.
Still, Portillo added, "What we're seeing now is the broader thematic change in the energy landscape. It's signaling to clients that there's going to be higher lows in the commodity [price], but also potentially higher highs."
Write to David Uberti at david.uberti@wsj.com and Jared Mitovich at jared.mitovich@wsj.com
(END) Dow Jones Newswires
April 03, 2026 10:00 ET (14:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
