Has the Iran conflict fundamentally changed the energy landscape?

Investing.com - Jefferies states that the Iran conflict has fundamentally reshaped the energy landscape. The firm believes that “advances in drone technology… should drive higher risk premiums for energy stocks in the future.”

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Analyst Lloyd Byrne wrote that investors should “focus on two key questions: (1) How long will the conflict last? (2) Should we buy the expected pullback?”

Jefferies says that recent trading has been driven more by positioning than fundamentals, noting that the VIX index triggered a “large-scale weekend unwind” and “non-fundamental price movements.”

As a result, software stocks rebounded, while ExxonMobil and Chevron underperformed. However, Byrne believes the core issue is that “the development of the Iran conflict differs from energy investors’ expectations,” especially considering the “closure of the Strait of Hormuz and the increasing vulnerability of Ras Laffan port.”

The firm states that the market is currently facing risks that had previously diminished during the shale oil era.

Jefferies wrote, “An event could drive significant inflation for a long period,” adding that drone technology has increased the likelihood that “a single ‘choke point’… could again cause long-term price shocks.”

Against this backdrop, Jefferies believes investors should prepare to “buy during the inevitable ‘consensus pullback’ that typically occurs after the end of geopolitical conflicts.”

The report highlights underweight positions in oil and natural gas stocks, specifically mentioning leveraged exploration and production companies such as OVV, COP, CVE, EOG, and NOG as buy-rated.

However, Jefferies warns that uncertainty remains high, including regarding Iran’s future leadership, and with increasing doubts about growth in the second half of 2026, oilfield services stocks may continue to underperform.

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