Analysis of the Impact of U.S. Policy Uncertainty toward Iran on Energy Markets and Oil & Gas Stock Investment Outlook

Based on the comprehensively collected data and analysis above, I will provide you with a detailed investment research report.

According to the latest reports, there are significant divisions in the U.S. Congress over military actions against Iran.

, clearly expressed skepticism about military strikes on Iran in interviews with CNN and Fox News. He warned that any military strike against Iran could backfire, uniting the Iranian people in support of their government rather than weakening the regime [1]. Citing historical lessons, Warner stated: “The last U.S. military intervention in Iran was in 1953, when a CIA-led coup overthrew the Iranian government to protect oil interests. Most historians believe this move ultimately led to the rise of the Islamic regime in the 1970s.”

also questioned the military option. He stated bluntly on an ABC News program: “I don’t know if bombing Iran will achieve the desired effect.” [2] Both senators believe that a military strike may not weaken the Iranian regime, but instead could unite the people against external enemies.

Policy Scenario	Likelihood	Market Impact
Limited Military Strike (Targeted Elimination/Cyber Attack)	Medium	Oil prices surge short-term then retrace
Full-scale Military Operation	Low	Oil prices rise sharply, energy stocks see increased volatility
Maintain Status Quo + Escalated Sanctions	High	Oil prices face downward pressure, energy stocks fluctuate moderately
Breakthrough in Diplomatic Negotiations	Low	Oil prices decline moderately

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The current international crude oil market faces the severe challenge of

. According to the December 2025 report from the International Energy Agency (IEA), the global crude oil oversupply could reach as high as in 2026 [3]. Goldman Sachs has lowered its 2026 average price forecast for Brent crude from $63 per barrel to $56, and for WTI crude from $60 per barrel to $52, warning that Brent crude prices could fall to around $40 per barrel if supply exceeds expectations or an economic recession occurs [4].

• WTI crude futures fell nearly 20% in 2025, marking the worst annual performance since the 2020 pandemic
• Brent crude fluctuated between $58 and $83 per barrel throughout the year, with an annual decline of over 18%, setting the record for the longest monthly losing streak since 2014
• On the last trading day of December 2025, WTI crude fell below $58 per barrel [3]

The global energy supply landscape is undergoing a

, which has weakened the impact of geopolitical risks on oil prices:

Supply Source	2025 Production Contribution	Market Impact
Non-OPEC+ Countries	+1.7 million barrels per day	Breaks OPEC’s monopoly
Brazil	Exceeded 4 million barrels per day for the first time	Potential to become the world’s third-largest oil producer
Guyana	Approximately 750,000 barrels per day (peak over 900,000 barrels per day)	Production increased nearly tenfold in five years
U.S. Shale Oil	Approximately 8.4 million barrels per day	World’s largest oil producer

The U.S. Energy Information Administration (EIA) pointed out that approximately 70% of the global crude oil supply growth in 2025 came from unconventional energy sources such as U.S. shale oil, Brazilian deep-sea resources, and Guyana [5]. This means that even if a large-scale conflict breaks out in the Middle East causing partial supply disruptions, production capacity in other regions of the world is sufficient to fill the gap, and the substantive threat of geopolitical risks to supply has been significantly reduced.

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According to market data, major oil and gas stocks showed divergent performance between November 2025 and January 2026 [6]:

Ticker	Company Name	Period Return	Annualized Volatility	Rating
XOM	Exxon Mobil	+9.54%	21.8%	Hold (50.9%)
CVX	Chevron	+5.24%	23.5%	Buy (62.7%)
COP	ConocoPhillips	+10.09%	26.2%	-
EOG	EOG Resources	-0.68%	24.8%	-
SPY	S&P 500 ETF	+1.57%	12.3%	-

• Oil and gas stocks outperformed the broader market as a whole (SPY rose 1.57%)
• Exploration and production companies (COP) performed the best, benefiting from high oil price sensitivity
• Integrated oil companies (XOM, CVX) provided stability through their downstream operations

As per the latest data,

, with a weekly decline of -1.59% [6]. Capital flow data shows that investors remain cautious about the energy sector, mainly due to the following reasons:

1. Price Risk
   : Sustained downward pressure on oil prices weakens the profit outlook for upstream companies
2. Policy Uncertainty
   : The combination of multiple factors including U.S. policy toward Iran, the situation in the Middle East, and U.S. domestic energy policies
3. Valuation Pressure
   : Although XOM and CVX have P/E ratios of 18.02x and 22.86x respectively, they lack attractiveness compared to other defensive sectors

• Market Cap: $525.54 billion, Current Stock Price: $124.62
• Analyst Consensus: Hold, Target Price: $142.00 (+13.9% upside potential) [7]
• Strengths: Refining business is considered undervalued by UBS, which is expected to boost cash flow
• Risks: Cautious about investments in Venezuela; CEO stated the country is “uninvestable”

• Market Cap: $324.16 billion, Current Stock Price: $162.13
• Analyst Consensus: Buy, Target Price: $172.00 (+6.1% upside potential) [7]
• Strengths: Has operations in Venezuela, poised to benefit from policy changes
• Recent earnings exceeded expectations (Q3 EPS $1.85 vs. consensus $1.69)

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In recent years,

. In September 2019, drone attacks on Saudi Aramco oil fields caused a sudden drop of 5.7 million barrels per day in Saudi crude oil production (accounting for approximately 6% of global supply), but oil prices only surged for two days before retracing [3]. In 2025, tensions between Iran and Israel in the Middle East escalated to the brink of war, yet international oil prices declined throughout the year.

1. Diversified Supply Sources
   : The U.S. shale oil revolution broke OPEC’s monopoly
2. Slowing Demand Growth
   : The IEA expects global oil demand growth to slow from 1.2% in 2025 to 0.8% in 2026
3. Development of Alternative Energy
   : The cost of renewable energy continues to decline, eroding oil’s share as an energy source

The ongoing protests in Iran (which broke out in late December 2025 due to economic hardship) have not yet caused substantial damage to oil facilities. Iran’s crude oil production and exports remain at the level of

, with exports exceeding 2 million barrels per day [8]. The key focus areas for the market are:

• Sanction Enforcement
  : The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) will continue to crack down on shadow fleets and facilitators
• Risk of Military Conflict
  : If the conflict escalates to threaten the Strait of Hormuz (a chokepoint for 30% of global seaborne oil trade), oil prices may experience short-term sharp fluctuations
• China Factor
  : Most of Iran’s oil is exported to China; the effectiveness of sanctions depends on China’s level of cooperation

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Scenario	Probability	Oil Price Forecast	Oil & Gas Stock Performance	Recommendation
Base Scenario : Maintain Status Quo + Sanctions	55%	$50-60	Neutral to Weak	Hold high-quality blue-chip stocks
Bullish Scenario : Escalation of Geopolitical Conflict	20%	$70-80	Short-term Strength	Buy upstream stocks with high price sensitivity
Bearish Scenario : Worsening Oversupply	20%	$40-50	Under Pressure	Reduce positions or hedge
Outlier Scenario : U.S.-Iran Reconciliation	5%	$45-55	Moderate	Focus on downstream refining stocks

• Prefer targets with
  low production costs
  : COP, EOG (U.S. shale oil costs approximately $40-50 per barrel)
• Avoid high-cost projects (e.g., Venezuelan heavy oil)

• Refining business provides
  price buffer
  : XOM, VLO (Valero Energy)
• Crack spreads benefit from supply-demand mismatches

• Orders for oilfield service companies such as SLB are positively correlated with drilling activity, facing short-term pressure

1. Position Control
   : Limit the allocation ratio of the energy sector to 5-10% of the portfolio
2. Hedging Strategy
   : Consider buying out-of-the-money put options to hedge against downside risks
3. Diversification
   : Allocate to different regional exposures (U.S./International/Emerging Markets)
4. Key Catalysts to Monitor
   :
   • January 30: XOM and CVX earnings reports (Q4 FY2025)
   • Progress in Russia-Ukraine peace talks
   • OPEC+ production policy
   • Developments in U.S.-Iran negotiations

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1. The direct impact of U.S. policy uncertainty toward Iran on the energy market is limited
   . Due to the diversification of global supply sources, the geopolitical risk premium has been significantly weakened. Unless the conflict directly threatens the Strait of Hormuz, it will be difficult for oil prices to see a trend-based rise.

2. Supply and demand fundamentals will dominate oil price movements
   . In 2026, oversupply pressure will persist, and the central oil price is expected to shift down to the $50-60 range. This will compress the profit margins of upstream oil and gas companies, but refining operations are expected to provide relative stability.

3. Divergence among oil and gas stocks will intensify
   . Integrated oil companies (XOM, CVX) have stronger defensive characteristics due to their diversified businesses and financial strength; exploration and production companies (COP, EOG) are more sensitive to oil prices, with greater volatility but also stronger elasticity.

4. Policy risks cannot be ignored
   . U.S. efforts to bring Venezuelan oil back to the market, potential adjustments to sanctions, and changes in domestic energy policies could all reshape the competitive landscape.

Target	Rating	Target Price	Rationale
XOM	Hold	$142.00	Undervalued refining business, stable cash flow
CVX	Buy	$172.00	Potential from Venezuelan operations, reasonable valuation
COP	Hold	-	High upstream sensitivity, high volatility
XLE (Energy ETF)	Hold	-	Diversified allocation tool

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[1] Reuters - “Some US senators skeptical about military options for Iran” (https://www.reuters.com/world/middle-east/some-us-senators-skeptical-about-military-options-iran-2026-01-11/)
[2] The New York Times - “Senate Democrat Says a U.S. Strike on Iran Risks Strengthening Its Government” (https://www.nytimes.com/2026/01/11/us/politics/us-iran-strike-protests-warner.html)
[3] Securities Times - “From Venezuela to Iran: Why is the International Crude Oil Market Immune to Geopolitical Conflicts?” (https://www.stcn.com/article/detail/3578323.html)
[4] China Energy Network - “Production Growth Crushes Demand Growth! Analysts Warn: 2026 Crude Oil Market May See ‘Low First, High Later’” (https://www.cnenergynews.cn/article/4Pan5VtxDN1)
[5] Forex CNFOl - “Iran Cuts Internet to Suppress Protests; Geopolitical Risks and Fund Inflows Provide Dual Impetus” (http://forex.cnfol.com/jingjiyaowen/20260111/31932414.shtml)
[6] Jinling API - Market Data (Energy Sector Performance, Major Oil & Gas Stock Price Data)
[7] Jinling API - Company Profiles (XOM, CVX Financial Indicators and Analyst Ratings)
[8] Energy Intelligence - “Iran Protests Spread as Oil Exports Offer Scant Relief” (https://www.energyintel.com/0000019b-7f4b-dca1-a3ff-ffefd95e0000)