‘Buy Energy’: UBS Suggests 2 Energy Stocks to Consider Amid Geopolitical Risk

The Middle East has erupted into progressive warfare implicit the past eleven days, and each eyes are turning to the Strait of Hormuz. This constrictive waterway links the oil- and gas-rich countries of the Persian Gulf to planetary shipping routes and is wide considered 1 of the astir captious vigor chokepoints successful the world. Roughly 20% of the world’s hydrocarbon supplies walk done the strait, meaning immoderate disruption determination tin rapidly ripple crossed planetary vigor markets.

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Oil prices reacted instantly arsenic the struggle intensified. Brent crude concisely surged to astir $120 per tube connected Monday – its highest level since the months pursuing Russia’s 2022 penetration of Ukraine – portion U.S. benchmark WTI climbed to a akin level. Yet, prices reversed sharply aboriginal successful the time aft President Donald Trump suggested the struggle could beryllium nearing its conclusion. Following those remarks, Brent and WTI tumbled backmost beneath $90 per tube by precocious trading.

Even aft that beardown reversal, crude remains acold supra the astir $70 per tube scope wherever it traded earlier the U.S. and Israel launched their run against Iran connected February 28.

Against this backdrop, the vigor analysts astatine UBS person been intimately monitoring the concern and its implications for the vigor sector. The slope believes the existent setup inactive favors vigor stocks and argues that geopolitical hazard whitethorn not yet beryllium afloat reflected successful marketplace pricing.

“We summation PTs and proceed to spot a affirmative risk/reward for Energy… The longer the Middle East struggle goes on, the much upside we spot to the full curve. We bash not judge the stocks and guardant curve bespeak that risk, arsenic some person moved <3% since Feb 20th, the Friday earlier the conflict. We besides spot continued upward unit connected planetary earthy state prices owed to imaginable Qatar proviso concerns. Based connected this setup, combo oil/nat state companies perchance person the astir FCF upside,” the squad wrote.

With that successful mind, the UBS analysts person singled retired 2 vigor stocks they judge are peculiarly good positioned to payment if lipid prices stay elevated. Using the TipRanks database, we took a person look astatine however these picks stack up against the broader Wall Street consensus. Let’s dive in.

Magnolia Oil & Gas (MGY)

We’ll commencement successful Houston, Texas, wherever Magnolia Oil & Gas operates arsenic an autarkic shaper successful the hydrocarbon field. The company’s footprint is successful the southeastern portion of the state, specifically successful the areas of Giddings and Karnes; the company’s Karnes holdings are considered a ‘coveted’ location, successful the halfway of the Eagle Ford Shale formation.