What Happened?
A number of stocks jumped in the afternoon session after oil and gas prices surged amid reports the U.S. was planning an extended blockade of Iranian ports.
Brent crude, a key international oil benchmark, rose 5% to nearly $117 a barrel, its highest level since the conflict with Iran began. The price increase raised concerns that the situation, could persist for much longer, creating broad uncertainty in the energy markets. For oil and gas producers, higher commodity prices generally translate to increased revenues and profitability, which often makes their stock more attractive to investors.
Adding to the volatility, the United Arab Emirates announced its departure from the OPEC oil cartel, introducing a new layer of uncertainty for global supply. This combination of geopolitical risk and rising commodity prices contributed to the broad market decline as investors grew more cautious.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Mixed or Offshore Upstream E&P company Green Plains (NASDAQ: GPRE) jumped 2.3%. Is now the time to buy Green Plains? Access our full analysis report here, it’s free.
- U.S. Shale E&P company HighPeak Energy (NASDAQ: HPK) jumped 1.5%. Is now the time to buy HighPeak Energy? Access our full analysis report here, it’s free.
Zooming In On Green Plains (GPRE)
Green Plains’s shares are extremely volatile and have had 53 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock gained 2.6% on the news that stalled peace talks between the United States and Iran caused a spike in crude oil prices amid ongoing supply disruptions.
The deadlock in negotiations led to the continued closure of the Strait of Hormuz, a critical chokepoint for global energy shipments.
The disruption sent Brent crude to a three-week high near $108 a barrel, while WTI futures climbed above $96. This situation was described by the International Energy Agency (IEA) as the largest energy supply shock on record. In response, several financial institutions upgraded their forecasts. Goldman Sachs raised its oil price forecast, citing supply disruptions from ongoing conflict in the Middle East.
The investment bank expected Brent crude, a key international benchmark, to trade around $90 a barrel, up from its previous projection of $80. Similarly, the forecast for West Texas Intermediate was increased to $83 from $75. This optimism was echoed by major oilfield service providers like SLB and Baker Hughes, who anticipated a rise in global spending on oil exploration and production.
Green Plains is up 67.1% since the beginning of the year, and at $17.18 per share, has set a new 52-week high. Despite the year-to-date gain, investors who bought $1,000 worth of Green Plains’s shares 5 years ago would now be looking at only $585.98.
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