Which energy stocks are most exposed to a closure of the Strait of Hormuz amid the U.S.-Israel-Iran conflict?
Seeking Alpha analysts Fluidsdoc and Grassroots Trading weigh in.
Fluidsdoc: Closure of the strait is causing disruption to the movement of oil and LNG out of the Persian Gulf to markets in the west. Qatar’s operations, in particular, have been impacted by this threat. Early in the conflict, it chose to shut down its LNG facilities at Ras Laffan, through which it processes and exports 77 mpta (20% of global capacity) of the product.
Companies whose earnings statements could be impacted by this event include ConocoPhillips (COP), ExxonMobil (XOM), Shell (SHEL), and TotalEnergies (TTE). These companies own interests in various phases of projects that feed into Ras Laffan, including Qatargas 3, North Field South, and North Field Expansion.
That said, these companies are all so huge that the investment thesis for them would not be seriously affected in the short term.
Grassroots Trading: The companies that would be most directly affected by the Strait of Hormuz closure are the ones that produce oil and export LNG from the Persian Gulf.
This is especially true for companies connected to Qatar’s LNG exports and oil/gas production in the Gulf region, because their shipments have to pass through the Strait of Hormuz to get to global markets. Examples include Shell (SHEL), TotalEnergies (TTE), and BP (BP). Meanwhile, even if Exxon Mobil (XOM) doesn’t ship all the natural gas itself, its partnership in related projects means it could still be indirectly affected as gas shipments through that region continue to face disruptions.
That said, large integrated oil companies operate in many segments of the energy business, so they’re generally diversified enough to benefit as oil prices rise. In contrast, companies that focus mainly on upstream activities, such as exploration and production, and don’t have refining or chemical operations to balance their businesses would likely see the sharpest earnings volatility. ConocoPhillips (COP), Occidental Petroleum (OXY), EOG Resources (EOG), Devon Energy (DVN), and APA (APA) come to mind.