With the US on the offensive, energy stocks have shot to the top of the S&P 500 this year. What comes next?

After three straight years of dismal performance, energy stocks have emerged as the biggest market winners so far in 2026, posting the biggest gains of the 11 sectors that constitute the S&P 500. 

This group of large-cap oil and gas producers, refiners, fuel retailers, and field services companies has jumped more than 20% since American special forces captured and extradited Venezuelan President Nicolás Maduro and launched a clampdown on sanctioned oil vessels seeking to transport Venezuelan crude. 

The audacity of that operation prompted some traders to build in a growing risk premium to oil prices, as they saw a rising likelihood the US would launch an attack on Iran. 

Alongside Israel, it did so over the weekend.

Energy stocks coasted to the top of the stock market charts thanks to those Iran-related risks, but the gains came before the rockets, drones, and F-35s actually started flying.

But going forward, further surges seem far from guaranteed. That’s partly because in a war, the enemy gets a vote.

Iran has responded with strikes on energy infrastructure throughout the region and the partial closure of the Strait of Hormuz — the crucial shipping choke point through which 20% of global oil and gas passes. The longer the partial closure lasts, experts say, the worse it will be for the world economy, and that includes oil and gas companies. 

“‘Consequential’ is deeply understating it. This is the big one,” said Rory Johnston, a commodities analyst and founder of research firm Commodity Context. “If we did fully lose supply at the Strait of Hormuz for a prolonged period of time, we’re talking astronomically high oil prices.” 

While high oil prices sound like a good thing for oil companies, such a scenario — Johnston guesses prices could rise to between $200 and $300 per barrel if the Strait is closed for an extended period — would essentially hammer the global economy into a deep recession, cratering demand for oil and gas.

Oil company insiders likewise say the impact of the war on their operations hinges on Hormuz. 

“It really comes down to how long the Strait of Hormuz is going to be closed to tanker traffic,” Exxon Mobil Senior Vice President Jack P. Williams told energy conference attendees Tuesday, when asked about potential challenges posed by the war. 

In the short term, ship owners are avoiding the strait for good reason. Insurers have largely withdrawn war coverage on vessels, Johnston says, a typical step they take during the outbreak of hostilities to allow them to renegotiate higher rates. Still, that’s inconvenient when Iran is threatening to immolate any ship that tries to get through the roughly 24-mile-wide choke point. 

The US is reportedly considering ways to incentivize insurers to provide coverage, and is even contemplating providing military convoys for tankers. President Trump said as much in a Truth Social message Tuesday.

But such steps wouldn’t address Iran’s willingness to continue attacking energy infrastructure around the region in a more aggressive way than some had expected.

On Monday, Iran hit Saudi Arabia’s largest refinery, Ras Tanura, temporarily halting production. And Qatar Energy halted production of liquefied natural gas at its Ras Laffan facility — the world’s largest LNG plant — after an attack. Iranian strikes also have reached a refinery in Kuwait, shuttered production in Iraqi Kurdistan, and closed down several Israeli gas fields, according to Reuters. 

The disruptions help explain the evolving reaction of markets to the situation. After rising on Monday, US energy stocks had a mixed reaction to the spreading war on Tuesday. 

US oil giant Exxon shares fell, despite prices for US benchmark West Texas Crude topping $75 a barrel, the highest level in a year. Chevron and ConocoPhillips were essentially flat. And field services company SLB Limted — formerly Schlumberger — tumbled more than 5% as its ties to the UAE and Saudi Arabia were seen by the market as a weakness. Service companies Baker Hughes and Halliburton also fell. 

Disruption will continue, it seems, as long as the war does. But how long will that be? 

Johnston says he doesn’t think President Trump would risk an ongoing war that lasted long enough to damage the US economy ahead of the midterm elections in November. 

“He wants to declare victory,” he said, but cautioned, “the Iranians are not giving him the opportunity yet.”

That’s why Johnston says he’s carefully watching whether any element of Iranian leadership emerges as potential partners to work with the US, essentially reprising the role of Venezuela’s Delcy Rodríguez, who has been a relatively pliant acting president since the American military captured and transported her predecessor, Maduro, to face trial in the US. 

That sort of scenario is harder to imagine in Iran. Regime antipathy to the US has been central to the Iranian government since the founding of the Islamic Republic in the late 1970s. But it’s not impossible, Johnston said. 

“How many layers deep into the redundant command structure of Iran does Trump need to kind of blow through in order to get someone who’s willing to deal with him?” Johnston said. “I think that’s just an unanswerable question right now.” 

In the meantime, Johnston said he’s also keeping track of whether oil and gas production begins to be shut down simply because producers have no ability to either ship it through the strait or store it. Such shut-ins of production could portend a longer period of elevated prices. 

“There’s just no telling how long it takes to get that production back on,” he said.