Israel-Iran conflict fuels best month for energy stocks since 2022
The European energy sector is staging its strongest rally in years as escalating hostilities between Israel and Iran stoke fears of supply disruptions. The conflict is sending oil prices and energy shares sharply higher across the continent.
The Euro STOXX 600 Energy index, which tracks major European oil and gas firms including BP, TotalEnergies, Eni and Repsol, has surged nearly 8% month-to-date, on track for its strongest monthly gain since October 2022.
The rally stands in stark contrast to the broader Euro STOXX 600 index, which has declined by 1% over the same period.
This 9 percentage point gap marks the sector's widest monthly outperformance since May 2022, underscoring the market's sharp pivot towards energy names as investors brace for prolonged geopolitical tensions in the Middle East.
BP shares have climbed 9% so far in June, on course for their best month since September 2023.
Italy's Eni has gained 9.1%, its strongest monthly showing since October 2022, while France's TotalEnergies is up 7%, a level last seen in April 2024.
Portuguese energy company Galp Energia has led the sectoral gains with a 12% jump.
The surge in energy equities mirrors a significant rally in oil prices. Brent crude has spiked to $75 a barrel, up 20% this month. That marks the largest monthly increase since November 2020, when news of successful COVID-19 vaccine trials first lifted global markets.
Oil prices may stay higher for longer, with analysts warning that the geopolitical risk premium now embedded in crude markets could persist.
Following Israeli airstrikes on Iranian nuclear and military targets, Tehran has raised the spectre of a potential closure of the Strait — a move that would choke off nearly 20 million barrels per day of crude and refined products, according to the International Energy Agency (IEA). While a complete shutdown remains unlikely, even limited disruptions could unsettle markets.
'There's the potential for disruptions to shipping through the Strait of Hormuz,' said Warren Patterson, head of commodities strategy at ING.
According to the expert, almost a third of global seaborne oil passes through this checkpoint and any material threat to that route sends an immediate signal to energy markets.
Patterson indicated that in the event of a significant disruption to flows through the Strait of Hormuz, oil prices could surge to $120 per barrel.
On Tuesday, President Donald Trump convened a high-stakes meeting with his national security team inside the White House Situation Room to discuss the possibility of US military involvement alongside Israel in its war against Iran.
Earlier that day, Trump had abruptly departed the G7 summit in Canada, fuelling speculation that a major foreign policy shift was imminent.
Although no official decision has yet been announced, Iran issued a clear warning that it would target US military bases across the Middle East if Washington entered the conflict.
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