Trump Postponed a Strike In Iran, and Oil Stocks Are Falling. As an Energy Investor, Here's What I'd Do Next.

President Trump recently issued an ultimatum to Iran. Fully reopen the Strait of Hormuz within 48 hours, or the U.S. would begin attacking the country’s power plants. Such strikes would likely drive Iran to retaliate against energy infrastructure in the Gulf, which could send oil prices even higher.

However, the President announced he was postponing potential military strikes against Iran’s power plants for five-days on Monday morning based on some productive dialogue with Iran over the weekend. This positive news sent stock prices soaring, while oil prices and oil stocks fell.

As an energy investor, here are two things I’d do right now.

Image source: Getty Images.

Build an oil stock watch list

This week will be a pivotal one for the oil market. If the U.S. and Iran start progressing toward peace, crude prices will keep falling. However, if the two sides can’t reach an agreement to de-escalate, crude prices could go much higher, especially if Iran attacks additional oil infrastructure in the Persian Gulf.

Given the uncertainty, I’d spend this week building a list of oil stocks that I’d buy based on the direction crude prices appear headed. One oil stock that would top my watch list is Chevron (CVX +1.35%). The oil giant has one of the lowest breakeven levels in the oil sector at less than $50 a barrel and a fortress balance sheet. Chevron is also on track to grow its cash flow at a more than 10% compound annual rate through 2030 at $70 oil. Those features put it in a strong position to weather lower oil prices if there’s lasting peace in the Middle East.

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NYSE: CVX

Chevron

Today’s Change

(1.35%) $2.72

Current Price

$204.45

Key Data Points

Market Cap

$403B

Day’s Range

$197.47 - $204.86

52wk Range

$132.04 - $205.08

Volume

656K

Avg Vol

12M

Gross Margin

14.66%

Dividend Yield

3.43%

Meanwhile, it can produce significantly more free cash flow if oil prices remain higher. While Chevron has some exposure to the Middle East, its diversified global operations position it to thrive no matter what happens next.

Look at investing in LNG

So far, the war has only temporarily disrupted the energy market, for the most part. The biggest blow came last week when Iran struck energy infrastructure in Qatar in response to an attack on its main natural gas field. That retaliatory attack severely damaged two liquefied natural gas (LNG) trains operated by QatarEnergy (ExxonMobil also has interests in the facilities). QatarEnergy said the attack will knock out 17% of its capacity for the next three to five years. That’s a potentially meaningful impact as Qatar is one of the world’s top three LNG producers.

This supply issue will affect the global LNG market long after the war with Iran ends. That’s why I’d start looking at investing in LNG stocks. Chevron and Exxon are both global LNG leaders. Meanwhile, Cheniere Energy and Venture Global are leading U.S. LNG producers. Cheniere Energy is currently expanding its LNG terminal in Corpus Christi, which should come online in stages over the next couple of years. Meanwhile, Venture Global recently announced a major expansion of its Plaquemines LNG terminal.

Focus on what’s more certain

Oil prices could make a big move depending on the outcome of the talks with Iran. That’s why I’d spend this week building a watch list of oil stocks to potential buy once there’s more clarity. I’d also start looking more closely at LNG, which could see the biggest long-term impact from the war.