Jefferies Identifies 'Oversold' European Energy Stocks Amid Geopolitics

Geopolitical tensions originating in Iran in late February have created a sharp divide in European energy stock performance, with several large-cap companies now appearing "oversold" despite strong fundamentals, according to a new analysis from Jefferies.

Market Divergence Creates Opportunities

The brokerage firm states that since the conflict began, investors have rewarded companies seen as direct beneficiaries of stronger oil and gas prices. This has created a growing performance gap between stocks whose gains are supported by improving earnings and others that have lagged despite limited operational exposure to the conflict.

Jefferies suggests this dispersion reflects a market debate over which companies deserve a geopolitical premium, creating selective buying opportunities in names that may have been unfairly left behind.

Winners and Laggards

Jefferies highlighted several companies that have rallied significantly since late February, benefiting from favorable market conditions:

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• Neste Oyj: Rallied 33% on the back of stronger diesel prices and supportive renewable fuel regulations.
• Repsol: Gained 17%, with Jefferies citing the potential for an upgraded share buyback program.
• Equinor ASA: Climbed 13%, supported by firmer European gas prices and a clear strategic outlook.

In contrast, the brokerage identified several heavyweights as oversold. It pointed to Shell PLC as a preferred opportunity, noting its acquisition of ARC Resources assets strengthens the case for its Canada LNG project. TotalEnergies SE was also described as oversold, with its diversified portfolio helping to mitigate Middle East risks.

Beyond Integrated Majors

The analysis extends to other energy sub-sectors, where similar trends are visible. In exploration and production, Vår Energi (+15%) and Tullow Oil (+11%) have performed well, while Jefferies sees value in oversold peers like Serica Energy, Harbour Energy, and Kosmos Energy.

Oilfield service companies including Maire, Technip Energies, and TechnipFMC have also underperformed, according to the report. Jefferies argued these firms have healthy order pipelines and could benefit from regional reconstruction spending once geopolitical tensions subside.