Written by Julia Rostova
The geopolitical landscape has shifted dramatically over the past few weeks, sending shockwaves through global energy markets. Following the outbreak of the US-Israel conflict with Iran in late February 2026, oil prices skyrocketed, with Brent crude surging more than 50% and peaking near $126 a barrel — the effective closure of the Strait of Hormuz, a critical chokepoint for roughly 20% of global oil and liquefied natural gas (LNG) supplies, resulted in an estimated daily production shortfall of 14.5 million barrels. However, the recent announcement of a fragile ceasefire and reports of a potential 14-point memorandum of understanding (MOU) to end the war have caused a sharp reversal. As Brent crude tumbled below $100 a barrel for the first time since April — a near-11% intraday drop on May 6 alone — investors are left grappling with a critical question: Are energy stocks still a buy in a post-resolution environment?
To answer this, we must untangle the complex web of supply disruptions, inventory levels, and the fundamental strengths of individual energy companies. While a diplomatic resolution may deflate the immediate ‘war premium’ built into crude prices, the structural realities of the oil market suggest that the sector’s profitability is far from over.
The Geopolitical Reality: A Prolonged Normalization
The immediate market reaction to the ceasefire news was euphoric. Global equities rallied, and oil prices plunged as much as 11% in a single day as traders priced in a ‘peace dividend’. The reported MOU — which allegedly includes a moratorium on Iranian nuclear enrichment in exchange for the lifting of US sanctions — has raised hopes for a swift reopening of the Strait of Hormuz, as reported by Axios via Sherwood News.
However, the reality on the ground is far more complicated. Even if a comprehensive peace deal is signed tomorrow, the normalization of maritime traffic will take months. As Chevron CEO Mike Wirth noted at the Milken Institute, the process of clearing mines, safely evacuating the estimated 20,000 seafarers stranded on 2,000 vessels, and restoring insurance coverage for tankers will be a protracted endeavor, as Fortune reported. The IRGC navy has signalled the strait could reopen once ‘threats from aggressors are neutralised,’ but that language leaves significant room for delay.
Furthermore, the disruption has severely depleted global inventories. According to ING Think, US gasoline inventories recently hit their lowest level for this time of year since 2014, while distillate stocks plunged to levels not seen since 2005. Roughly 13 million barrels per day of disrupted supply is being offset by inventory drawdowns that are accelerating with each passing week. This structural supply deficit means that even as geopolitical tensions ease, the underlying physical market remains tight. Consequently, while oil may retreat from its panic-induced highs, it is unlikely to crash back to the pre-war baseline of $70 a barrel in the near term.
Energy Stocks: Diverging Paths in a Shifting Market
During the height of the conflict, the energy sector was the undisputed champion of the stock market. The S&P 500 Energy Index surged over 37% in the first quarter of 2026, vastly outperforming the broader market, as Reuters reported. Now, as the war premium fades, investors must become more selective, focusing on companies with low breakeven costs, strong balance sheets, and resilient shareholder return programs. The following verdicts are based on each company’s post-resolution investment thesis.
ExxonMobil (XOM) — HOLD
ExxonMobil has been a standout performer, recently posting a 15% beat on first-quarter adjusted EPS of $1.16, driven by record production in Guyana exceeding 900,000 barrels per day. The company’s ambitious $25 billion earnings growth target by 2030 and its forward P/E ratio of 15.2x make it a formidable integrated major. Morningstar rates ExxonMobil as approximately 5% undervalued against a $156 fair value estimate, while the Wall Street consensus carries a Moderate Buy rating with an average 12-month target of $170.63. However, at its current valuation, the stock is trading near fair value. Its downstream refining operations provide a buffer against falling crude prices, but the upside is somewhat limited in a de-escalating geopolitical environment. Investors should hold for the reliable 2.78% dividend yield and long-term Guyana growth, but new money may find better entry points elsewhere.
Chevron (CVX) — BUY
Chevron presents a compelling case for long-term investors. Despite the recent pullback in crude, Chevron’s breakeven price remains below $50 a barrel, ensuring robust free cash flow generation even if oil prices continue to slide. As The Motley Fool noted, the company’s acquisition of Hess is already bearing fruit, contributing to a projected 7–10% production growth in 2026. RBC Capital maintains an Outperform rating with a $220 price target. Furthermore, Chevron boasts a 39-year streak of consecutive dividend increases and a forward yield approaching 3.8%. Its diversified business model, balancing upstream exploration with downstream refining, makes it uniquely equipped to weather the volatility of a post-war transition. The stock is a buy for investors seeking quality, income, and resilience.
Occidental Petroleum (OXY) — SELL
Occidental Petroleum was one of the biggest beneficiaries of the oil price spike, with its stock surging over 73% in the past year, according to Zacks. However, this outperformance makes it highly vulnerable to a price correction. OXY is primarily an upstream producer with a higher breakeven cost of approximately $60 a barrel compared to its integrated peers. The company recently lowered its annual production forecast due to war-related disruptions, and its modest 1.7% dividend yield offers little downside protection. As The Motley Fool’s analysis of Chevron versus OXY observed, Occidental’s dividend was cut during the 2020 oil crash, underscoring its sensitivity to commodity cycles. With a forward P/E of 14x, the market has already priced in significant earnings growth that may not materialise if oil stabilises in the $80 range. Investors sitting on substantial gains should consider taking profits.
Devon Energy (DVN) — BUY
For investors seeking pure-play upstream exposure at a reasonable valuation, Devon Energy is an attractive proposition. Morningstar identifies Devon as the most undervalued stock on its best-energy-stocks list, trading roughly 12% below a $55 fair value estimate. Devon is one of the lowest-cost operators in the US shale patch, anchored by its premier Delaware Basin assets. Although the company slightly missed first-quarter revenue estimates ($3.81 billion versus the $4.32 billion consensus), its commitment to returning 60% of free cash flow to shareholders via a fixed-plus-variable dividend framework remains intact, with a 31% increase to its fixed dividend recently announced. With a consensus Buy rating and an average analyst price target of approximately $55, Devon is well-positioned to deliver strong returns even in a normalising oil market.
ConocoPhillips (COP) — HOLD
ConocoPhillips has enjoyed a stellar run, up roughly 35% year-to-date following a strong first-quarter earnings beat of $16.05 billion in revenue and $2.18 billion in net income. The company’s highly diversified portfolio — spanning the US Lower 48, Alaska, Canada, Libya, and significant international LNG projects — provides a natural hedge against regional disruptions. Every $1 increase in the price of WTI adds over $140 million to Conoco’s annual cash flow. However, like ExxonMobil, the stock appears fairly valued at current levels with a forward P/E of 13.5x. Morningstar rates it at a $125 fair value estimate. The company’s strategic pivot toward long-term LNG contracts derisks its future but caps its immediate upside. It remains a solid hold for income-focused investors.
Diamondback Energy (FANG) — BUY
Diamondback Energy is a masterclass in operational efficiency. As a pure-play Permian Basin operator, the company boasts industry-leading completion efficiencies of 3,900 feet per day and some of the lowest per-unit cash operating costs in the sector. Morningstar describes Diamondback’s strategy as simple and effective: acquire and exploit assets in the low-cost Permian Basin. Following its transformative $26 billion acquisition of Endeavor, Diamondback has cemented its dominance in the Midland Basin. The company returns 50% of its free cash flow to shareholders and maintains a robust balance sheet. While first-quarter results highlighted some margin compression, Diamondback’s relentless cost discipline makes it a prime candidate to thrive regardless of whether oil sits at $80 or $100.
The Verdict: Selective Optimism
The resolution of the US-Iran conflict will undoubtedly remove the speculative froth from the oil market. However, the structural realities — depleted global inventories, ongoing OPEC+ capacity constraints, and a protracted timeline for normalising Middle Eastern supply chains — suggest that oil prices will settle at a meaningfully higher equilibrium than the pre-war baseline. Even with Brent now hovering near $100, prices remain roughly 40% above where they were before the first shots were fired.
Energy stocks are no longer a blind ‘buy everything’ trade. The rising tide that lifted all boats is receding, and the market will increasingly reward operational excellence, low breakeven costs, and diversified business models. Companies like Chevron, Devon Energy, and Diamondback Energy are uniquely positioned to generate substantial free cash flow in this new environment, making them strong buys. Conversely, highly leveraged or higher-cost upstream operators like Occidental Petroleum face significant downside risk as the war premium deflates.
As the dust settles in the Strait of Hormuz, the energy sector remains a vital component of a balanced portfolio — provided investors know exactly where to look.
Summary: Energy Stock Verdicts at a Glance
| Ticker | Company | Verdict | Forward P/E | Key Thesis |
| XOM | ExxonMobil | HOLD | 15.2x | Near fair value; strong Guyana growth; reliable dividend |
| CVX | Chevron | BUY | 18.8x | Sub-$50 breakeven; 39-yr dividend streak; diversified model |
| OXY | Occidental | SELL | 14.0x | High breakeven ~$60; production cut; vulnerable to price drop |
| DVN | Devon Energy | BUY | ~13x | Most undervalued; low-cost Delaware Basin; 60% FCF return |
| COP | ConocoPhillips | HOLD | 13.5x | Diversified; LNG exposure; fairly valued at current levels |
| FANG | Diamondback | BUY | ~14x | Lowest-cost Permian; 50% FCF return; operational excellence |
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial or investment advice. The views expressed are those of the author and do not necessarily reflect the official policy or position of Equities Orbis. Energy markets are highly volatile and subject to geopolitical risks. Investors should conduct their own research or consult with a licensed financial advisor before making any investment decisions. The author may hold positions in the securities mentioned. Past performance is not indicative of future results.
