What Happened?
A number of stocks jumped in the morning session after energy prices soared as President Donald Trump announced broader economic warfare against Iran.
Trump stated on social media platform Truth Social that he would launch 'the most crushing economic operation ever taken against any country,' describing it as 'economic warfare. In response, West Texas Intermediate and Brent crude contracts surged. When oil prices rise, energy companies' potential for higher revenues and profits increases, boosting investor confidence and driving up stock prices across the sector. The escalation also dimmed near-term hopes that a U.S.-Iran deal would reopen the Strait of Hormuz, a critical oil choke point.
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 Talos Energy (NYSE: TALO) jumped 5.1%. Is now the time to buy Talos Energy? Access our full analysis report here, it’s free.
- Oilfield Services company Transocean (NYSE: RIG) jumped 2.9%. Is now the time to buy Transocean? Access our full analysis report here, it’s free.
- U.S. Shale E&P company HighPeak Energy (NASDAQ: HPK) jumped 3.1%. Is now the time to buy HighPeak Energy? Access our full analysis report here, it’s free.
- Mixed or Offshore Upstream E&P company Murphy Oil (NYSE: MUR) jumped 4.3%. Is now the time to buy Murphy Oil? Access our full analysis report here, it’s free.
Zooming In On Talos Energy (TALO)
Talos Energy’s shares are extremely volatile and have had 30 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 3 days ago when the stock gained 3.3% on the news that Iran ruled out extending a 60-day memorandum of understanding with the United States.
The June 17 memorandum was meant to reopen Hormuz while the two sides negotiated a nuclear deal within 60 days, CNBC reported. President Trump told Fox News he has “no time schedule” and is “not in a hurry.” A senior Iranian official told Reuters that Tehran would shift from defense to offense if diplomacy fails. Energy stocks rebounded because they (energy companies) make more money when oil is scarce and expensive. If the strait stays blocked, less crude reaches the market, so the price of each barrel rises.
Talos Energy is up 60.3% since the beginning of the year, and at $18.04 per share, it has set a new 52-week high. Investors who bought $1,000 worth of Talos Energy’s shares 5 years ago would now be looking at an investment worth $2,007.
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