1 hour ago
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Matt DiLallo, The Motley Fool
Mon, March 30, 2026 astatine 8:35 AM CDT 4 min read
The struggle with Iran has already driven up lipid prices. Brent, the planetary benchmark, has surged by much than 70% this twelvemonth to implicit $100 a barrel. That has fueled a large rally successful vigor stocks. For example, the mean vigor banal successful the S&P 500 is up astir 40% already this year.
If the struggle escalates, lipid prices could go overmuch higher, taking energy stocks with them. I deliberation Occidental Petroleum (NYSE: OXY) and Diamondback Energy (NASDAQ: FANG) could treble successful 2026 if there's a large escalation successful the warfare with Iran.
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Shares of Occidental Petroleum are already up astir 60% this year. The lipid and state institution was connected way for a stronger 2026 earlier lipid prices surged. Occidental sold its chemicals subsidiary, OxyChem, to Berkshire Hathaway earlier this twelvemonth for $9.7 billion. That provided it with currency to repay indebtedness and execute its targeted level. The involvement disbursal reduction, on with different outgo savings, positioned Occidental to make much than $1.2 cardinal successful incremental escaped currency travel this twelvemonth with nary summation successful lipid prices, a astir 30% summation from past year.
With lipid prices present overmuch higher, Occidental is connected gait to nutrient an adjacent bigger escaped currency travel gusher this year. The institution tin usage that windfall to further fortify its much-improved equilibrium expanse by gathering a bigger currency presumption and repaying further debt. Occidental tin besides repurchase much shares. The institution could besides resume redeeming Berkshire's preferred equity investment, which it presently doesn't program to restart until 2029. While a further escalation of the struggle with Iran would beryllium atrocious for the planetary economy, it could alteration Occidental Petroleum to dramatically reshape its superior operation this year, transferring meaningful worth from creditors to shareholders.
Diamondback Energy has already gained astir 35% this year. It could person a batch further to tally if lipid prices stay high.
The lipid and state institution has low-cost operations. It lone needs crude to mean $30 a tube to make capable currency to drill the indispensable wells to support its existent accumulation rate. As a result, it tin make meaningful escaped currency travel astatine higher prices. At $50 oil, it tin nutrient implicit $3.1 cardinal successful escaped cash, and astatine $80 oil, implicit $6.7 billion.
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