Middle East tensions send European energy stocks soaring amid oil price surge
European energy stocks have surged as tensions in the Middle East push oil and gas prices higher. Since late February, the sector has outperformed the broader market, with analysts now predicting further gains. The conflict involving Iran has triggered a sharp rise in energy prices. In response, the Stoxx 600 index fell by 8.6%, while the energy subindex climbed by 10%. Investors are now factoring in long-term shifts in energy security and the growing value of stable supply chains.
Morgan Stanley analysts have upgraded their outlook for European energy stocks to 'attractive'. They cite heightened supply risks in the Middle East and a favourable macroeconomic climate for the sector. The bank also raised its ratings for BP and Repsol to 'overweight', highlighting their strong positioning in a high-price environment.
Despite the recent rally, analysts believe the sector still has room to grow. However, Shell received a downgrade to 'neutral' due to its limited potential for further gains in a rising price scenario. The energy sector's strong performance contrasts with wider market declines. With geopolitical tensions sustaining higher prices, companies like BP and Repsol are expected to benefit most. Meanwhile, Shell's outlook remains more constrained in the current climate.
