Analysis of the Impact of Middle East Geopolitical Conflicts on Global Energy Prices and Oil & Gas Stock Investments

Based on the latest market data and geopolitical dynamics, I systematically analyze the impact of escalating geopolitical conflicts in the Middle East on global energy prices and oil & gas stock investments for you.

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Date	Event	Potential Impact on Energy Market
June 2025	12-day war between Israel and Iran	Missile confrontations on both sides’ home territories; Iranian nuclear facilities attacked
October 2025	Gaza ceasefire agreement reached	Two years of high-intensity conflicts temporarily ended, entering the governance phase
December 2025	Nationwide protests broke out in Iran	Rial depreciated by 42.2%, inflation rate reached 72%
January 2026	US military strike on Venezuela	Claimed to take over Venezuela’s oil industry

The Middle East in 2025 is in a “period of order restructuring”; the “US-led regional security architecture” formed after the Cold War is no longer effective [1]. The reconstruction of Gaza is expected to take 10-15 years and require $50-80 billion in investment, but it is difficult to achieve in the short term due to unclear security mechanisms [1].

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In 2025, the international crude oil market experienced a unique “steady decline” trend. Despite frequent geopolitical events (Israel-Iran confrontation, Russia-Ukraine conflict, Red Sea crisis), Brent crude fell from nearly $80 per barrel at the beginning of the year to about $60 per barrel at the end of the year [2].

• Brent crude: Full-year trading range of $58-$83 per barrel, annual average of $68, a year-on-year decrease of approximately 15%
• WTI crude: Cumulative decline of nearly 20% during the year, the worst annual performance since the 2020 pandemic [3]

Historical Event	Oil Price Increase at That Time
1979 Iranian Islamic Revolution	Approximately 150%
2002 Venezuelan Coup	Approximately 40%
2019 Saudi Oil Field Attack	Peaked then retreated two days later
2025 Israel-Iran Conflict	Brief increase followed by continuous decline

1. Supply Surge
   : Global crude oil production growth mainly comes from OPEC+, the US, Brazil, Guyana, and Canada. These five entities contributed over 50% of global incremental output, totaling approximately 1.5 million barrels per day [2]

2. Weak Demand
   : The International Energy Agency (IEA) predicts that global oil demand growth will slow from 1.2% in 2025 to 0.8% in 2026 [3]

3. Failure of Risk Premium
   : Rise of emerging oil-producing countries - Brazil’s crude oil daily output exceeded 4 million barrels for the first time in history in October 2025; Guyana’s annual output increased nearly tenfold, with a peak of over 900,000 barrels per day by the end of 2025 [4]

Institution	Brent Crude Forecast	Main Viewpoints
Citigroup	Annual average of $62 per barrel	Trading range of $55-$75
S&P Global	Approximately $60 per barrel	Supply-demand relationship is the core determining factor
Goldman Sachs	Downgraded to $56 per barrel	Oversupply of approximately 2 million barrels per day
JPMorgan Chase	$58 per barrel	Supply growth rate is 3 times the demand growth rate

: If non-OPEC countries’ output exceeds expectations or a global economic recession occurs, Brent crude prices may fall to around $40 per barrel [4].

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Based on the latest market data [0]:

Indicator	Exxon Mobil (XOM)	Chevron (CVX)
Return from December 2025 to January 2026	+7.33%	+6.83%
20-day moving average	$119.71	$152.58
1-year return	+14.03%	-
Market capitalization	$525.5 billion	$305.4 billion
P/E (TTM)	18.02x	-

• S&P 500 return during the same period: +2.26%
• Volatility of energy stocks: 1.60%-1.76%, 0.52% higher than the broader market

According to data analysis, the correlation between oil & gas stocks and crude oil prices shows weak correlation characteristics:

• Correlation between Brent crude price and XOM: 0.236
• Correlation between Brent crude price and CVX: 0.125

1. Oil & gas stocks are driven more by company fundamentals and performance, rather than solely by oil prices
2. Large integrated oil & gas companies have smoothed oil price fluctuations through upstream-downstream integration and diversified businesses
3. Investors are re-evaluating the impact of geopolitical risks on the pricing of oil & gas stocks

• Buy/Overweight: 41.5%
• Hold: 50.9%
• Sell: 7.5%
• Consensus target price: $142.00
  (13.9% upside potential from current price) [0]

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Geopolitical conflict → Concerns about supply disruptions → Oil price increase → Oil & gas stocks benefit

Geopolitical conflict → Market assesses actual supply impact → If key channels like the Strait of Hormuz are not threatened → Oil prices react mildly

Factor	Impact Path	Current Status
High global inventories	Strong supply buffer capacity	As of October 2025, global observable inventories reached 8.03 billion barrels, hitting a new high since August 2021 [3]
Development of alternative energy	Slowdown in oil demand growth	Substitution effect of new energy is gradually emerging
Non-OPEC production capacity	Fills supply gaps	Emerging oil-producing countries such as Brazil and Guyana contribute nearly 30% of incremental output
US shale oil	Strategic regulator	Output remains at a high level continuously

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• Potential Positive Catalyst
  : If the conflict escalates to threaten the Strait of Hormuz (through which approximately 20% of global oil shipments pass), it may lead to supply disruptions
• Potential Negative Catalyst
  : Oversupply expectations persist, and institutions remain bearish on oil prices

1. Focus on large integrated oil & gas companies with upstream assets and inventory buffer capacity
2. Use derivatives such as options to hedge short-term volatility risks
3. Monitor changes in the relative strength of oil & gas stocks compared to the broader market

1. Low oil prices may become the new normal
   • Global oil is returning to the essence of an ordinary commodity from a tool for political games
   • Dominance of supply-demand fundamental pricing is strengthened

2. Focus on high-quality asset allocation
   • Integrated giants such as Exxon Mobil and Chevron have strong risk resistance capabilities
   • Focus on dividend yield - XOM’s dividend yield is approximately 3.2%, which has long-term allocation value

3. New Energy Transition Opportunities
   • Traditional energy companies are also accelerating the transition to clean energy
   • Monitor the progress of energy transition and changes in capital allocation

Risk Type	Specific Performance	Response Recommendations
Geopolitical Risk	Unexpected escalation of conflicts	Maintain moderate positions and set stop-loss levels
Economic Recession Risk	Further decline in demand	Monitor macroeconomic indicators
Policy Risk	Tightening of carbon emission policies	Monitor ESG investment trends
Valuation Risk	Changes in the valuation of oil & gas stocks relative to the broader market	Dynamically adjust allocation ratios

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1. Geopolitical risk premium has significantly declined
   : The traditional logic that “wars in the Middle East must drive up oil prices” has failed, and the oil market is entering a new phase dominated by supply-demand fundamental pricing [4]

2. Oversupply dominates the market
   : In 2026, the global crude oil oversupply may reach 3.84 million barrels per day, and low oil prices may become the new normal [3]

3. Oil & gas stocks performed relatively stably
   : XOM and CVX both achieved positive returns (+7.33% and +6.83%) from December 2025 to January 2026, outperforming the broader market [0]

4. Short-term volatility opportunities still exist
   : Major geopolitical events may still trigger short-term price pulses, but their sustainability is questionable

5. Shift in investment strategy
   : It is recommended to shift from “event-driven” to “fundamental-driven” investment, focusing on the company’s profitability and dividend returns

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[1] Phoenix Net - Top 10 Events in the Middle East in 2025: From “Proxy Wars” to “Order Restructuring” (https://news.ifeng.com/c/8pJfDGVZZYA)

[2] Jiemian News - Global Crude Oil Prices Will Be Below $65 in 2026 (https://finance.eastmoney.com/a/202512303606082128.html)

[3] Eastmoney - Reporter’s Observation | The Center of International Oil Prices May Still Move Down in 2026 (http://finance.eastmoney.com/a/202601083613019917.html)

[4] Securities Times Net - From Venezuela to Iran: Why Is the International Crude Oil Market Immune to Geopolitical Conflicts? (https://finance.sina.com.cn/roll/2026-01-08/doc-inhfqpsr3839444.shtml)

[0] Jinling AI Financial Database (Real-time Market Data)