Energy rally continues on Middle East supply shocks
LNG stocks lead gains as Strait of Hormuz threats drive oil prices higher
Energy stocks continued their rally on Tuesday as escalating tensions in the Middle East renewed fears of supply disruptions, with liquefied natural gas producers leading the sector higher.
Cheniere Energy surged 3.89% to $298.36, while Exxon Mobil advanced 2.75% to $165.56 and Chevron added 1.14% to $207.55. The gains underscore how the sector is benefiting from elevated crude prices and heightened demand for US LNG exports amid Middle East production risks.
Oil prices have risen sharply since the onset of the Iran war, with West Texas Intermediate climbing approximately 47% to nearly $99 per barrel and Brent Crude surging 65% to a four-year high of $119 per barrel, according to Morningstar analysis. Economists anticipate further price increases if restricted oil access continues.
LNG stocks have emerged as major beneficiaries of the supply shock. Morningstar reports that Venture Global LNG has jumped 53.5% since the war began and 118.1% year-to-date, while Cheniere Energy has risen 12.9% since the war and 37.3% in 2026. The strength reflects increased global demand for US natural gas exports as Middle Eastern LNG supplies face disruption risks.
The broader energy sector has outperformed the wider market. The Morningstar US Energy Sector Capped Index has gained nearly 30% this year, compared with the Morningstar US Market Index, which has declined about 3% over the same period. Oil and gas exploration and production companies—including Devon Energy, EOG Resources, Occidental Petroleum, Diamondback Energy, and ConocoPhillips—have posted double-digit returns since the conflict started.
Geopolitical risks intensified after Kuwait's petroleum chief warned that a closure of the Strait of Hormuz would be "beyond catastrophic" and trigger a domino effect across the global economy. Iran is holding the world economy hostage by blockading the strategic waterway, said Shaikh Nawaf Al-Sabah, CEO of Kuwait Petroleum Corporation. The Strait handles approximately one-fifth of global oil consumption, making any sustained disruption a severe supply shock.
Not all energy stocks have shared in the rally. Oilfield service companies including Weatherford International, Baker Hughes, SLB, and NOV have experienced sharp declines, while tanker equities such as International Seaways and Frontline have fallen despite soaring freight rates, reflecting investor concerns over operational risks. However, TradingKey analysts note that shipping, insurance, and aviation segments present potential "second-order opportunities" where risk and valuation may be mispriced.
Morningstar analysts remain optimistic that the conflict and market disruption will be short-lived, viewing trade issues as temporary. However, the sector's performance in the coming weeks will likely hinge on developments in the Middle East and whether major shipping lanes remain open. For now, energy companies with direct exposure to higher commodity prices and US export capacity continue to attract investor interest.