Oil Stocks Surge Amid U.S.-Iran Conflict Impacting The Strait of Hormuz

Oil stocks surged to the top of the S&P 500 (State Street SPDR S&P 500 ETF Trust) early Monday as the U.S.-Israel conflict against Iran entered its third day, disrupting Iran's oil export infrastructure and tanker traffic through the Strait of Hormuz.

Wall Street seems to anticipate a comparable recovery this time. The S&P 500 fear gauge, the CBOE Volatility Index (VIX), rose to 21.59, crossing into a level indicative of nervousness but far from panic. For context, the VIX reached over 60 during the market turmoil triggered by the 2018 U.S. tariff announcements.

Energy giants ExxonMobil (Exxon Mobil Corporation), Occidental (Occidental Petroleum Corporation), and APA (APA Corporation) were among the best performers in the S&P 500. Fertilizer manufacturer CF Industries (CF Industries Holdings, Inc.) also saw a significant boost, ranking as the No. 2 S&P 500 stock behind Palantir (Palantir Technologies Inc.). This surge is linked to the fact that about one-third of global trade in urea and ammonia passes through the Strait of Hormuz.

CF Industries had warned of potential global supply shocks during its Q4 earnings call. According to the U.S. Energy Information Administration (EIA), 20 million barrels of oil per day, about 20% of global consumption, flow through the Strait of Hormuz. The EIA estimates that 2.6 million barrels per day from Saudi Arabia and the United Arab Emirates could be rerouted through pipelines to avoid this chokepoint.