Rise in U.S. Energy Stocks Before Market Opening Due to Tensions in the Middle East

The stock prices of leading US energy companies experienced a significant boost in pre-market trading on Wednesday. This development is due to concerns over the escalation of tensions in the Middle East, which drove oil prices higher. A missile attack by Iran on Israel and Washington's unequivocal support for a potential Israeli response against Tehran have put the markets in a risk-aversion stance. This led to strong demand for safe havens like the Japanese Yen and the Swiss Franc, as well as for stocks in the oil and defense sectors. The price of Brent crude rose by 2.8% to USD 75.59 per barrel, while the price of US crude increased by 3% to USD 71.92. “The involvement of Iran is a particularly challenging development for the markets, as investors rightly fear that Israeli retaliation could disrupt global oil supplies,” said Matthew Ryan, Head of Market Strategy at financial services firm Ebury. Iran plays a key role in the global oil market, producing about 5% of the world's oil. In this environment, the stock prices of major US energy companies Exxon Mobil and Chevron rose by 1.6% and 1.5%, respectively. Leading players in the oil and gas sector, ConocoPhillips, Occidental Petroleum, and Devon Energy, also recorded gains between 1.5% and 1.9%, while shares of oilfield equipment companies SLB and Halliburton increased by approximately 2%. Analysts forecast a continued "nervous" market situation as investors await Israel's response and its impact on supply conditions. Ryan added, “The broader implications for the markets include an increasing likelihood of a significant rise in global oil futures and a new phase of elevated energy prices and consumer price inflation. However, the consequences will not be as severe as following the invasion of Ukraine.” Additionally, the stock prices of US defense companies Lockheed Martin and RTX also rose by approximately 1.5% in pre-market trading. Phases of global geopolitical unrest have repeatedly led to short-term gains in defense stocks over the past three years, as the demand for weapons is expected to increase.