Oil stocks rise following weekend U.S. strikes on Iran

Investing.com - Shares in oil stocks jumped in premarket trading on Wall Street on the Monday following weekend U.S. attacks on Iranian nuclear facilities, mirroring an uptick in crude prices.

Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) both climbed by more than 1% before the opening bell, along with ConocoPhillips (NYSE:COP), Hess Corporation (NYSE:HES), and Occidental Petroleum (NYSE:OXY).

Markets are now keen to see how the sudden strikes, which came after U.S. President Donald Trump previously suggested that he would take as long as two weeks to deliberate on a possible attack on Iran, could impact sentiment, inflation and interest rates.

Much of the worry over price growth stems from oil, with traders warning in recent days that an escalation in the Israel-Iran fighting could lead to a disruption of key crude supplies, particularly along the Strait of Hormuz along Iran’s southern coast.

"While Iran possesses the ability to harass shipping and create temporary disruptions, historically economic, military, and diplomatic costs have led Tehran to show restraint in following through on closing the Strait," analysts at Texas Capital said in a note to clients. "Having said that, the current situation could prompt the regime to abandon the restraint it has shown historically."

A subsequent spike in oil prices could refuel inflationary pressures, potentially persuading the Federal Reserve to further delay potential interest rate cuts.

Brent crude futures for August jumped by 0.8% to $76.10 per barrel by 06:39 ET on Monday and West Texas Intermediate crude futures rose by 0.8% to $74.38 a barrel. Both of the contracts have pared back some earlier gains.

Iran has yet to give any clear indication of how it plans to respond to the U.S. attacks on three nuclear facilities on Saturday, saying that it reserved all options to defend itself.

The Islamic republic has also warned of "everlasting consequences" and stepped up its aerial bombardments of Israel, which kicked off the violence 11 days ago with its own surprise strikes on Iranian nuclear infrastructure.

Iran has called Trump a "gambler" and seemed to hint that the weekend strikes expanded the range of legitimate targets for its military. Trump, meanwhile, raised the question of regime change in Iran in a social media post on Sunday.

Media reports in Iran have suggested that the country is mulling blocking the Strait of Hormuz, a key artery for oil and gas supplies being sent around the world from the Middle East. Other reports have said that Iran may target one of several U.S. military bases located throughout the region.