Oil Prices Rise As Iran War Rocks Markets
As the war with Iran enters its second week, oil prices continue to rise, reaching their highest levels since 2022. The fall caused volatility in the stock market, which also lowered the major indices and influenced the decisions of buyers and sellers of Wall Street institutions, as well as retail traders.
But for those looking to hedge against further portfolio losses, the recent rise in asset prices offers smart investors an opportunity to use the Middle East situation to their advantage in the short term.
Oil prices return to epidemic levels
Last week’s military escalation led to Iran effectively closing the Strait of Hormuz, a nearly 90-mile-long, narrow strait connecting the Persian Gulf and the Gulf of Oman that is vital to the world’s oil trade.
According to the US Energy Information Agency, about 20 million barrels of oil – equivalent to about 20% of the world’s total oil consumption – are shipped every day.
The price of Brent crude, the global oil benchmark, is now sitting at $105 per barrel, while the US benchmark, West Texas Intermediate, is hovering around $103 per barrel. Both of those figures are up from July 2022.
That reduction in supply is already translating into higher prices at the tap. According to both GasBuddy and AAA, the average price per gallon of gasoline in the United States is currently $3.47, up from $2.90 per gallon one month ago.
On Sunday, CNN reported that the increase in the price of gasoline exceeded gasoline, noting that “an increase of 84 percent, or an increase of 22% in the price of diesel, which makes a liter of that important fuel $4.60.”
But the increase in oil prices does not only affect drivers. Oil majors – including ExxonMobil, Chevron and Shell – produce a wide range of fuel products, from industrial chemicals and jet fuel to heating oil and diesel fuel, all of which have seen dramatic price increases.
Meanwhile, heating oil is up 86% since the start of the year, and the price of kerosene-based jet fuel, which requires about 200 hydrocarbon compounds to produce high-altitude, low-temperature performance, has also risen sharply. The spot price of jet fuel is currently 204% higher than its 20-year low in April 2020, according to the US Energy Information Agency.
As volatility increases, the market suffers
With uncertainty also gripping markets, the CBOE Volatility Index (VIX) – a popular measure of expected stock market volatility – rose 106% in 2026. Since the coordinated US-Israeli attack on Iran began on Feb. 28., the VIX rose 50%.
During that time, that high volatility sent the Nasdaq down 1.69%, the S&P 500 down 2.71% and the Dow Jones Industrial Average down 4.03%.
But as the market broadly turns red, one sector in particular has been in the green: energy. Before the crash started this year, the energy sector was already outperforming 10 other S&P 500 sectors for the first time since 2022.
Energy’s year-to-date (YTD) gain stands at around 27%. For context, the S&P 500’s YTD loss is 2.49%, while the technology sector has struggled with a YTD loss of 4.64%.
Going forward, more performance can be expected. Integrated oil companies – large, vertically integrated companies that control the entire petroleum value chain – have their hands in every aspect of the petroleum production life cycle, making them well positioned to pass on rising input costs through multiple markets, not only recouping their costs in the process but also increasing their profit margins in doing so.
Rising oil prices are an investment opportunity
The stocks of many Big Oil companies remain a safe bet going forward, as they were already among the top performers in 2026 and are benefiting from the natural market cycle. Before the war began, the S&P 500’s leading gains were the result of rotating speculative and high-flying AI and software stocks.
Since late last year, runaway technology valuations and fears of an AI bubble have encouraged investors to take part in the flight to safety. Energy stocks, which have not been very valuable in comparison, have been one of the few beneficiaries. While that gap in valuations is tight, the oil major’s shares are still trading at attractive prices given their financial performance.
Investors can also get broad exposure to energy through sector exchange-traded funds (ETFs) — diverse baskets of stocks grouped together often by theme — such as the Energy Select Sector SPDR Fund, or XLE.
As the world’s largest energy ETF, XLE has assets under $39 billion, a low expense ratio of 0.08% and a dividend yield that now yields 2.56%, or $1.46 per share annually. This fund has gained about 25% in 2026.
But more important than its low cost and efficiency this year, XLE owns many large energy stocks, including ExxonMobil, Chevron, ConocoPhillips, SLB (formerly known as Schlumberger), Phillips 66, Kinder Morgan, Baker Hughes, Valero Energy, Marathon Petroleum, Diamondback Energy and 15 other major companies that include fonafuel. chain.
The fund was a hit with institutional Wall Street investors last year, with inflows of more than $15 billion compared to outflows of just over $2 billion, indicating that the so-called “smart money” was taking advantage of the undervalued power.
According to Investing.com, KeyBanc analysts noted last week that despite the ongoing Iranian crisis, energy trading remains the same, as current prices fail to reflect the strength of the supply chain. The research note highlighted how analysts are “temporarily seeing oil prices, creating a trading cycle higher [rotational] trading we see at fat prices.”
For those looking to hedge against further losses in the more vulnerable corners of their portfolios, increased exposure to energy can help offset any underperformance.
More from the coin:
Iran War Sends Gold and Oil Prices Higher. Gas Could Be Next
Ignore the 4% Rule: This Is the Best Retirement Investment Strategy for Most Americans
There are over 12,000 ETFs. Which is Right for Your Age?
