Middle East conflicts and shipping bottlenecks are making Brent and WTI oil prices swing unpredictably in 2026.

Fighting around key chokepoints like the Strait of Hormuz is causing major price spikes and stockmarket anxiety, changing company valuations overnight. However, US and Canadian drillers are safely isolated from the drama and are pumping out historic amounts of crude oil.

Cenovus Energy Inc. is right in the middle of this shift. As a massive North American energy player leading in oil sands and refining, its operations are geographically shielded from Middle East shocks, allowing fluctuating Brent prices to directly boost its valuation. During its Q1 26 earnings call, management explicitly noted that this global geopolitical friction triggered severe commodity volatility and market uncertainty.

Rolling in green?

Even with the chaos, Cenovus posted record upstream production, surging 19% y/y to a record 972,100 boe/d, while downstream throughput dropped 31% y/y to 458,500 bbls/d, primarily due to the WRB divestiture.

With the company ditching its WRB refineries, which tanked US refining volumes, its Q1 26 revenue took a hit. It witnessed a 7% y/y drop, clocking in at CAD 12.3bn compared to CAD 13.3bn.

However, its operating margins spiked 56.9% to CAD 4.4bn, up from Q1 25’s CAD 2.8bn, increased by oil price swings.

Upstream collected CAD 3.7bn (up from CAD 2.6bn last quarter) on higher oil prices and increased production. Downstream went into overdrive, surging to CAD 734m from a tiny CAD 149m in the prior quarter as the team nailed seasonal demand and refined product prices jumped.

These figures were instrumental in boosting net profit: up 83% y/y to CAD 1.57bn, up from CAD 859m in Q1 25.

Crude gains

At CAD 40.5, Cenovus’ 121% 1-year run looks like a massive win. Still, it is lower than its 52-week high of CAD 44.1. The market has ballooned the stock to a CAD 75.8bn (USD 54.8bn) market cap.

Valuation tells the same story. At 10.9x based on potential FY 27 earnings versus a 2-year average of 11.4x, the market is still discounting the stock, despite the strong run.

Analysts are buying the volume hype. Out of the 17 tracking analysts, sixteen have "buy" ratings and just one on "hold": their CAD 45.9 average target price suggests 19% upside potential.

Rough waters

The biggest risk is still oil prices. If Brent and WTI prices fall, this would quickly affect earnings.

Debt is another pressure point. Net debt has jumped to about CAD 8.3bn after the MEG deal, which means less room to manoeuvre if prices stay weak or projects slip. On the ground, things are just as messy: wildfires forced shutdowns, equipment issues knocked out production, and even weather slowed offshore work.

Then there are the things they really can’t control: currency fluctuations, pipeline bottlenecks and global politics. Altogether, this means a business that looks strong on paper, although one that is still exposed when conditions turn.