Jefferies Sees Buying Opportunities in 'Oversold' European Energy Stocks

Recent geopolitical conflict involving Iran has created a significant performance gap among European energy stocks, with several large-cap companies now trading at a discount to their fundamental value, according to a new analysis from Jefferies.

Market Divergence Creates Opportunities

Analysts at the brokerage noted a sharp divergence since the conflict began in late February, as investors rewarded companies seen as direct beneficiaries of stronger oil and gas prices. This has created what Jefferies describes as a growing divide between stocks whose gains are justified by improving earnings prospects and those that appear oversold despite limited operational exposure to the conflict.

The wide dispersion in stock performance reflects a debate over which companies deserve a geopolitical premium and which have been unfairly left behind, creating selective buying opportunities, the report stated.

Winners and Laggards

Jefferies highlighted several integrated oil companies that have outperformed since late February, attributing their gains to specific fundamental drivers:

• Neste Oyj: Rallied 33% on stronger diesel prices and supportive renewable fuel regulations.
• Repsol: Gained 17%, helped by the prospect of an upgraded share buyback program.
• Equinor ASA: Climbed 13%, supported by firmer European gas prices.

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In contrast, the brokerage identified several heavyweights as 'oversold' opportunities. Jefferies named Shell PLC as a preferred pick, noting a recent asset acquisition extends its reserve life. TotalEnergies SE was also described as oversold, with its diversified portfolio helping to offset Middle East risks.

Among exploration and production companies, Jefferies said stocks including Serica Energy, Harbour Energy, and Kosmos Energy now look oversold despite improving balance sheets and stronger liquidity.

Oilfield Services Also Undervalued

Jefferies also sees value in the oilfield services sector, where companies including Maire, Technip Energies, GTT, and TechnipFMC have underperformed. The analysis argued these firms have seen limited direct disruption from the Middle East conflict and maintain healthy order pipelines.

The brokerage suggested these service companies could also benefit from an acceleration in regional reconstruction spending once geopolitical tensions ease.