Oil surges as US-Iran strikes reignite Strait of Hormuz fears — buy energy stocks for the breakout
Fresh US military strikes on Iran have reignited fears that oil shipments through the Strait of Hormuz — a critical global shipping route — could be disrupted. Oil prices jumped on the news, and bond prices fell as investors worried about higher inflation.
Idea
The Strait of Hormuz handles roughly one-fifth of the world's oil supply, so any military escalation near it immediately pushes oil prices up. Fresh US strikes on Iran have done exactly that. Rising oil prices directly boost the revenues and profits of major oil companies like ExxonMobil and Chevron, and their stock prices tend to follow oil higher with a short lag. With the conflict escalating rather than moving toward a resolution, this oil rally has room to run — and energy stocks are still catching up to the move in crude.