Energy stocks surge as oil tops $100 on Iran supply shock
Exxon and Chevron climb as Tehran rejects US peace proposal, demanding control of strategic Strait of Hormuz
Energy stocks rallied on Wednesday as Brent crude surged above $100 per barrel following Iran's rejection of a US peace proposal and renewed threats to control the strategic Strait of Hormuz, a waterway handling approximately one-fifth of global oil supplies.
ExxonMobil climbed 7.7% over the past two weeks to $163.26, while Chevron advanced 7% to $205.15, with both majors positioned to benefit from sustained elevated oil prices. The S&P 500 Energy Sector Index has surged 24.4% year-to-date and gained 8.8% over the past month, making it the best-performing sector in 2026.
Brent crude futures traded between $103.35 and $106.18 per barrel on Wednesday, while West Texas Intermediate ranged from $91.28 to $93.49, both up more than 1% on the day. The price rally accelerated after Iran formally rejected a US ceasefire proposal on March 25, instead issuing five demands including recognition of its "sovereign right" to control the Strait of Hormuz.
Analysts at Citigroup and Kotak Securities project Brent could reach $120 per barrel in the near term, with a bull case scenario of $150 if the conflict and supply disruptions persist. Some extreme models suggest prices could spike to $200 if the Strait of Hormuz remains closed.
The Strait of Hormuz has been closed since March 4, disrupting the passage of roughly 10 million barrels per day of Middle Eastern oil. While OPEC+ began gradually increasing production in April 2025 to unwind 2.2 million barrels per day of voluntary cuts, the 206,000 barrel-per-day monthly increase is insufficient to offset the massive supply shortfall from Gulf disruptions.
Tehran has intensified pressure on global shipping, with Iranian media reporting that officials have drafted legislation to implement a toll system requiring payments for safe passage through the strategic waterway. G7 foreign ministers are gathering to discuss de-escalation options, but mixed signals from both sides have kept markets on edge.
Oil markets have entered backwardation, a pricing structure where near-term contracts trade above longer-dated futures, signaling tight physical supplies and immediate supply concerns. This structure typically benefits integrated oil companies like Exxon and Chevron, which can capture higher margins from their upstream production while selling refined products at elevated prices.
Exxon currently trades above its $154.79 analyst target price, while Chevron's $205.15 share price exceeds its consensus target of $196.33, suggesting investors may be pricing in further upside from sustained high oil prices. However, economic models indicate that oil prices sustained above $120-$130 per barrel significantly increase the likelihood of global recession, which could eventually dampen demand and weigh on energy sector performance.