By Jason Chau
Major Asian energy stocks surged in reaction to higher crude oil prices amid escalating Middle East tensions after U.S. and Israeli strikes on Iran over the weekend.
The oil-and-gas majors are likely to benefit from more expensive oil as the Middle East conflict escalates with shipping through the strategically vital Strait of Hormuz, a chokepoint for global energy trade, sharply reduced.
The uncertainty and concerns about supply helped drive up crude prices in Asian trade Monday with front-month WTI crude oil futures 6.1% higher at $71.12 per barrel and front-month Brent crude oil futures gaining 6.4% to $77.51 per barrel.
But energy stocks were a rare bright spot in on otherwise dark day with most Asian stock markets broadly lower.
The impact of the Iran conflict on equities is mostly from higher energy prices which could "tighten financial conditions, pressure margins and reawaken stagflation concerns, said Norbert Rucker, Julius Baer's head of economics and next generation research, in a note.
He noted that oil and gas stocks "have historically provided a partial hedge against supply-driven [oil] price spikes -- an area investors may want to look at from a portfolio-construction perspective, even if we do not actively advocate an overweight."
Shares of China's three major oil and gas majors--Cnooc, PetroChina and Sinopec--rose between 3.7% and 10% in Shanghai.
In Japan, major oil refiners and explorers also rallied with both Inpex Corp and Japan Petroleum Exploration Co. hitting all-time highs, with gains of 5.7% and 11%, respectively.
Oil companies in other markets such as Woodside Energy Group in Australia also surged earlier in the day.
In his latest remarks on the conflict, U.S. President Trump said the military operation against Iran could last for four weeks.
The escalating Middle East conflict could raise oil prices significantly, ING's head of commodities strategy Warren Patterson said in a research report.
"While it is still very early days and the situation is developing at a fast pace, it does not appear that this military action will be quick and short-lived," he added.
However, other analysts expect the impact to be more temporary.
"Over the coming weeks, our base case is the usual pattern of a short-lived but this time more intense oil and gas price spike," Norbert Rucker, Julius Baer's head of economics and next generation research, said in a note.
Write to Jason Chau at jason.chau@wsj.com
(END) Dow Jones Newswires
03-02-26 0142ET
