US energy stocks surged in premarket trading on Wednesday, fueled by rising oil prices as escalating tensions in the Middle East triggered concerns over potential disruptions to global oil supplies.
The market reacted sharply to Iran’s missile strike on Israel and the United States’ firm backing of its ally, raising fears of broader conflict that could impact energy markets.
Brent crude, the global oil benchmark, rose by 2.8%, hitting $75.59 per barrel, while US crude climbed 3% to $71.92.
Investors flocked to safe-haven assets, including the Japanese yen and Swiss franc, while energy and defense stocks saw significant gains.
“The involvement of Iran is a particularly worrying factor for markets, with the potential for retaliatory strikes from Israel threatening to destabilize global oil supplies,” Matthew Ryan, head of market strategy at financial firm Ebury, was quoted as saying by Reuters.
Iran, a key player in global oil production, contributes about 5% to the world’s total output, making any conflict involving Tehran a critical factor for the oil market.
US energy giants Exxon Mobil and Chevron saw their shares rise by 1.6% and 1.5%, respectively.
Other major oil producers, including ConocoPhillips, Occidental Petroleum, and Devon Energy, also saw gains ranging from 1.5% to 1.9%.
Oilfield services firms SLB and Halliburton each recorded increases of around 2%.
Analysts expect continued volatility in energy markets as the world waits to see how Israel will respond and how this might affect global oil supply chains.
“There’s a real risk that oil prices could spike further, leading to a prolonged period of elevated energy costs and higher inflation for consumers,” Ryan added.
However, he noted that the impact is unlikely to be as severe as the market shocks following Russia’s invasion of Ukraine.
In addition to energy stocks, US defense companies such as Lockheed Martin and RTX both gained about 1.5% premarket.
Geopolitical conflicts have historically led to increased demand for defense-related assets, with the current unrest following a similar pattern.
As the situation in the Middle East unfolds, the focus remains on how this conflict could affect not only oil prices but also global economic stability.
Investors and analysts alike will be watching closely to gauge the potential long-term impacts on energy markets.
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