The Middle East is once again at the heart of global energy turbulence. In a dramatic escalation, Israel launched coordinated airstrikes on Iranian nuclear and energy infrastructure — rattling global oil markets and prompting a surge in crude prices not seen since Russia’s invasion of Ukraine. As fears of a full-blown regional conflict deepen, oil traders are now recalibrating risk, demand-supply balances and inflation forecasts. The broader question: will this shock merely pass, or does it mark a structural shift in oil’s geopolitical risk premium?

Some oil-related stocks responded swiftly to the developments. Civitas Resources (CIVI Quick QuoteCIVI - Free Report) jumped 6.5% on Friday, APA Corporation (APA Quick QuoteAPA - Free Report) climbed 5.3%, and Diamondback Energy (FANG Quick QuoteFANG - Free Report) gained 3.7% — highlighting investor interest in producers poised to benefit from price volatility. Let’s unpack the market reaction, supply threats, and where oil prices could head from here.

Crude Geopolitics Trumps Fundamentals

Brent crude and WTI futures soared more than 7% on Friday after Israel’s surprise strikes hit multiple Iranian energy assets, including the South Pars gas field and the Shahr Rey oil refinery near Tehran. Brent climbed to approximately $75 per barrel, with WTI holding above $70. For context, this represents the largest single-day price jump in three years, erasing weeks of bearish sentiment tied to oversupply fears.

Even though the physical damage to Iran’s energy infrastructure is still being assessed, the psychological damage to markets is significant. Iran accounts for around 4-5% of global oil supply, and nearly 20% of global crude and LNG passes through the Strait of Hormuz, a narrow waterway that Iran could, in theory, block. Although analysts remain skeptical about Iran's ability — or willingness — to do so due to economic self-harm and U.S. naval presence, mere speculation has widened risk premiums.

Supply Fears

While the immediate concern revolves around Iranian oil infrastructure, a larger worry is supply-chain disruption. Iran’s retaliatory threats include potential closures or interference at the Strait of Hormuz. If realized, even temporarily, this could cut off nearly 20 million barrels per day of crude and condensates — enough to send oil soaring above $100-$120 per barrel, according to JP Morgan and Goldman Sachs estimates.

Beyond Iran, gas output from Israel has also taken a hit. The Leviathan and Karish platforms, accounting for about 1.8 billion cubic feet of gas daily, were shut down, halting exports to Egypt and Jordan. This creates ripple effects in LNG markets, especially in Asia and Europe, where nations are scrambling to replace pipeline imports with seaborne LNG cargoes. With only one of Egypt’s three FSRUs (Floating Storage and Regasification Unit) operational, the region could see rising demand for spot cargoes, higher freight rates and tighter margins.

Market Sentiment Shift and Inflation Concerns

Oil’s recent surge is being driven as much by shifting sentiment as by supply fears. For months, traders shrugged off Middle East tensions—but that’s changed rapidly. The escalating conflict between Israel and Iran has reintroduced geopolitical risk as a central concern, prompting a sharp market reassessment. This shift is already reflected in revised fuel price forecasts, which now signal a likely increase, reversing earlier expectations of a decline.

More broadly, the energy shock could rekindle inflation, complicating central banks’ easing paths. Rising transport and freight costs are likely to hit consumers and businesses across sectors — from aviation to agriculture. Central banks in oil-importing nations may have to postpone rate cuts or even hike again if headline inflation rebounds. Already, gasoline is expected to rise 20 cents per gallon in the United States, with knock-on effects likely for the CPI in the coming months.

The Path Forward

Despite the uncertainty, a few themes are emerging. First, actual supply disruptions remain limited so far. That could temper the rally in the short term, especially if diplomatic efforts resume. However, with Iran threatening retaliation and Israel showing no signs of de-escalation, a prolonged conflict is a growing risk.

Second, spare capacity in OPEC — primarily Saudi Arabia — can act as a buffer, but the margin for error is shrinking. If Iranian exports fall or tankers face interference, the pressure will mount. In that scenario, Brent could test triple digits, especially if coupled with rising summer demand in Asia and hurricane-related supply issues in the United States.

3 Energy Stocks to Monitor

U.S. shale producers — like Diamondback Energy, APA and Civitas Resources — are well-positioned to benefit. These Zacks Rank #3 (Hold) companies have strong balance sheets, domestic operations insulated from the Middle East turmoil, and leverage to higher prices. Last Friday’s gains could be a preview of things to come if crude continues its upward march.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Civitas Resources: Based in Denver, Civitas Resources focuses on the DJ Basin in Colorado and the Permian Basin across Texas and New Mexico. With strong well returns and a valuable midstream component, Civitas is positioned for growth. The company has become a leading consolidator in the DJ Basin and offers substantial returns to its shareholders, with a balanced production mix of oil, NGLs and natural gas.

APA Corporation: Founded in 1954, Houston, TX-based APA Corporation is one of the world's leading independent energy companies engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. APA’s Suriname portfolio in South America is particularly exciting, where it continues to achieve significant drilling success. In the United States, the upstream player mainly operates in the prolific Permian Basin.

Diamondback Energy: Midland, TX-headquartered Diamondback Energy is an independent oil and gas exploration and production company with its primary focus on the Permian Basin, where it has approximately 885,000 net acres. Its activities are concentrated in the Wolfcamp, Spraberry and Bone Spring formations. Diamondback focuses on growth through a combination of acquisitions and active drilling in America's hottest and lowest-cost shale region.