News wire — U.S. energy companies’ shares gained on Wednesday as crude oil prices climbed 3% on worries over an escalation in tensions in the Middle East after Israel and the U.S. vowed to respond to Iran;s missile attack on its arch foe.
Israeli Prime Minister Benjamin Netanyahu promised that Iran would pay for its missile attack on Tuesday, while Teheran said any retaliation would be met with “vast destruction”, raising fears of a wider war.
Brent futures climbed $2.26 to $75.82 a barrel, while U.S. West Texas Intermediate (WTI) crude jumped $2.38 by 1320 GMT.
The S&P 500 energy sector climbed 1.4% to hit highest in over a month, while the broader indexes slipped.
“We would anticipate increased levels of volatility until a clearer picture of what may (or may not) happen appears. OPEC+ ministers are meeting today to discuss the state of the market, but expectations are that there will be no policy changes, with the cartel unwinding quotas from December,” Panmure Gordon analyst Ashley Kelty said.
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U.S. energy majors Exxon Mobil and Chevron rose 1.7% and 1.5%, respectively.
ConocoPhillips, EOG Resources and Devon Energy gained between 1.1% and 1.8%, while oilfield services firm SLB and Halliburton rose about 1.6% and 1.3%, respectively.
Positions in oil can serve as a portfolio hedge against the worsening crisis, while market fundamentals are also positive, UBS analysts wrote in a note.
“There might not ultimately be any disruption to supply though, so current events do not necessarily change the narrative for the oil market,” said Callum Macpherson, head of commodities at Investec.
Reporting by Sourasis Bose and Mrinalika Roy in Bengaluru; Editing by Leroy Leo and Sriraj Kalluvila – Reuters
