Introduction

As tensions in the Middle East reach a boiling point, crude oil futures soared by nearly 5% during an intraday session on Thursday. This spike was largely triggered by President Biden's assertion that his administration is considering support for Israel's potential strikes on Iranian oil facilities. At around 12:50 PM ET, Brent crude futures for November delivery rose to $77.44 per barrel, while West Texas Intermediate (WTI) reached $73.65 per barrel, marking gains of 4.8% and 5.1%, respectively.

Impact of Potential Conflicts on Oil Supply

Analysts at Citi have cautioned that a significant attack from Israel on Iran’s oil export capabilities could take as much as 1.5 million barrels per day (bbl/day) off the global market. They also point out that strikes targeting downstream assets could reduce output by approximately 300,000 to 450,000 bbl/day. According to ANZ Bank, Iran's oil production recently attained a six-year peak of 3.7 million bbl/day in August.

Price Predictions Amid Blockades and Strikes

Clearview Energy Partners has further predicted a dramatic increase in oil prices. A blockade in the Strait of Hormuz could elevate prices by as much as $28 per barrel, while an Israeli strike on Iranian energy infrastructure might lead to a price hike of $13 per barrel. Economic sanctions imposed by the U.S. and its allies could add a potential increase of $7 per barrel.

Current Market Trends

Despite the current backdrop of these geopolitical shifts, oil markets have displayed a disquieting trend of bearish behavior. Commodity analysts at Standard Chartered have noted a troubling dislocation in how oil prices relate to market fundamentals. Recently, the number of short positions held by money managers in Brent futures has surpassed long positions for the first time ever, indicating extreme bearish sentiment.

Risks of Market Rebound

However, this trend may not be sustainable. Market analysts suggest that the current extreme short positions raise the risk of a sharp price rebound. In light of these developments, here are a few noteworthy oil and gas stocks that are outperforming both their sector and the broader market:

Oil and Gas Stocks to Watch

1. Targa Resources Corp. (NYSE: TRGP)