US energy stocks rally 5% as Hormuz uncertainty lifts crude prices

US oil and gas producers rallied Monday as crude climbed on Strait of Hormuz reopening uncertainty, with Apache Petroleum up more than 5 percent and WTI futures at $80.35.

"Traders have been conditioned by the on-again, off-again nature of the negotiations and are waiting for tangible evidence, such as verified tanker movements or formal agreements, before further unwinding the risk premium," said Tim Waterer, chief market analyst at KCM Trade.

Brent crude futures rose 3 percent to $82.64 a barrel, while WTI gained 2.8 percent to $80.35. Both benchmarks had fallen more than 7 percent last week on hopes that Iran and Oman were close to reaching a deal that would reopen the waterway, which carried a fifth of the world's oil before the war. Murphy Oil rose more than 4 percent, Occidental Petroleum, Chevron and ExxonMobil each gained more than 3 percent, and ConocoPhillips advanced more than 2 percent.

Iran said Sunday a deal with Oman defining new shipping lanes was in its "final stages" but reiterated the waterway would only reopen once Washington met other conditions, including US compensation for its widespread attacks. Iranian Foreign Minister Abbas Araqchi said Tehran will not start talks with Washington as long as the US breaches an interim deal signed in June. With no clear timeline for reopening, the risk premium embedded in crude prices could persist, keeping energy producers' margins elevated.

Supply threats compound as Houthis strike Saudi refinery

The Iran-aligned Houthis said they hit Saudi Aramco's Jazan refinery on Sunday, two days after the kingdom signed a defence pact with Turkey and Pakistan in response to growing regional instability from the US-Israeli war on Iran. The attack adds to supply-side risks that have kept a floor under crude prices even as diplomatic channels show signs of progress. Saudi Arabia has been a key swing producer in global oil markets, and any disruption to its refining or export infrastructure carries outsized implications for global supply balances.

Separately, the UAE's ADNOC said Friday that 15 of its vessels had been attacked transiting the Strait of Hormuz since the beginning of the conflict, a reminder of the persistent threat to shipping in the region. These attacks highlight the fragile security environment around the waterway, which before the war handled roughly 20 million barrels of crude and refined products daily — equivalent to about a fifth of global consumption. The cumulative effect of these incidents has been to raise insurance premiums for tanker operators and push some shippers to seek alternative routes, adding to the cost of moving crude.

Reopening timeline remains uncertain

Even if a deal is reached, restoring safe, normal shipping through the Strait could take weeks or months due to mine-clearance, insurer confidence, and operational readiness. The last time the waterway faced a prolonged closure was during the Iran-Iraq war in the 1980s, when the "Tanker War" disrupted oil flows for years and forced a fundamental restructuring of global shipping routes.

For US energy producers, higher crude prices translate directly into improved cash flows and shareholder returns. The sector's rally Monday reflects investor confidence that elevated oil prices will persist as long as the Hormuz situation remains unresolved. With the S&P 500 energy sector tracking crude closely, sustained prices above $80 a barrel for WTI would support continued outperformance for producers with low breakeven costs, including ExxonMobil and Chevron, which have been returning record cash to shareholders through buybacks and dividends.

The broader macro implication is that persistent supply disruption risk in the Middle East could feed into inflation expectations, complicating the Federal Reserve's path toward further rate cuts. Energy costs remain a significant input to headline CPI, and a sustained spike in crude would put upward pressure on consumer prices at a time when the Fed is weighing the balance between inflation and growth. For import-dependent economies across Asia, higher crude prices also widen trade deficits and put pressure on local currencies, creating a second-order transmission channel that extends well beyond the energy sector.

This article is for informational purposes only and does not constitute investment advice.