Asian Energy Stocks Gain as Oil Prices Rebound on US-Iran Tensions

Asian energy stocks broadly advanced on Thursday after a significant overnight rebound in oil prices, fueled by renewed concerns over potential supply disruptions from the Middle East amid escalating tensions between the United States and Iran.

Oil Rally Lifts Energy Shares

Crude oil prices snapped a recent losing streak, with benchmark Brent crude settling up 3.9% at $103.08 per barrel and West Texas Intermediate (WTI) crude rising 1.8% to $92.16 per barrel. The gains provided a tailwind for regional energy producers:

• Hong Kong-listed shares of CNOOC rose 2.1%.
• Australia's Santos and Woodside Energy gained 1.4% and 1.0%, respectively.
• The Shanghai-listed shares of CNOOC also added 0.7%.

This positive performance mirrored the U.S. market, where the S&P 500 Energy sector was a notable outlier, climbing approximately 1% against a backdrop of wider market declines.

Geopolitical Tensions Drive Prices

Ad

The primary catalyst for the oil price rally was a flare-up in U.S.-Iran relations. According to reports, the rally followed a declaration from Iranian President Masoud Pezeshkian that Tehran would not yield to U.S. pressure, which came a day after threats were issued against Iran by former U.S. President Donald Trump. This exchange has heightened market anxiety about the stability of oil supply from the crucial producing region.

Market participants are also monitoring Saudi Arabia's efforts to repair a key east-west pipeline damaged in a drone attack. The pipeline is strategically important as it offers an alternative route for crude exports that bypasses the Strait of Hormuz.

Broader Markets Weighed by Yields

While the energy sector thrived, the broader U.S. stock market finished lower overnight. The S&P 500 fell 0.8%, the Nasdaq Composite dropped 1.1%, and the Dow Jones Industrial Average declined 0.7%. The downturn was driven by the dual pressures of rising oil prices, which can stoke inflation, and surging U.S. Treasury yields.

Yields on the 10-year U.S. Treasury note climbed to their highest level since 2007. The move came after data showed U.S. business activity in September expanded at its fastest pace in over five years, increasing expectations that the Federal Reserve may implement another interest rate hike at its October meeting.