European Energy Stocks Diverge on Geopolitical Tensions, Creating Opportunities: Jefferies

A sharp split has emerged in European energy stocks since the Iran conflict began in late February, with some companies benefiting from higher commodity prices while others have been unfairly punished, creating selective buying opportunities, according to an analysis by Jefferies.

Market's Tale of Two Sectors

Jefferies noted that investors have rewarded companies perceived as direct beneficiaries of rising oil and gas prices, leading to a significant performance gap. The brokerage highlighted several standout performers whose gains are supported by improving earnings prospects.

• Neste Oyj has rallied 33% on the back of stronger diesel prices and supportive renewable fuel regulations.
• Repsol has gained 17%, with Jefferies citing a potential upgrade to its share buyback program and opportunities in Venezuela.
• Equinor ASA climbed 13%, supported by firmer European gas prices and a clearer strategic outlook.

'Oversold' Majors Present Value

In contrast, Jefferies argued that several heavyweight energy firms have lagged and now appear oversold despite having resilient fundamentals and limited operational exposure to the conflict. The brokerage identified Shell PLC as a preferred opportunity, noting that its acquisition of ARC Resources assets extends its reserve life and strengthens the case for its Canada LNG project.

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TotalEnergies SE was also described as oversold, with the bank stating its diversified portfolio has helped mitigate risks from the Middle East. Jefferies also pointed to Ithaca Energy PLC, which it said has greater flexibility to pursue acquisitions.

Opportunities in E&P and Services

The divergence extends to the exploration and production (E&P) space. While Vår Energi rose 15% and Tullow Oil gained 11%, Jefferies said companies including Serica Energy, Harbour Energy, and Kosmos Energy now look oversold despite improving balance sheets and strategic progress.

Jefferies also flagged opportunities among oilfield service companies like Maire and Technip Energies. The firm argued these stocks have underperformed despite healthy order pipelines and limited disruption, and could benefit from regional reconstruction spending once geopolitical tensions ease. This dispersion reflects a debate over which companies deserve a geopolitical premium, creating value in those left behind, the brokerage concluded.