Middle East Conflict Reshapes Energy Landscape, European Oil and Gas Exploration Stocks Rating Adjusted

Investing.com - JPMorgan adjusted its European oil and gas stock ratings on Thursday after Iran announced the closure of the Strait of Hormuz, threatening approximately 30% of the world’s seaborne crude oil and 20% of global liquefied natural gas supplies. The broker raised its 2026 Brent crude oil price assumption by $10 to $72 per barrel.

The broker upgraded EnQuest from “Neutral” to “Overweight,” raised Aker BP from “Reduce” to “Neutral,” maintained Var Energi’s “Overweight” rating, and kept Harbour Energy’s “Neutral” rating. The average target price for these four stocks was raised by 21%.

Track real-time stock movements and analyst updates on InvestingPro - 50% off

Iran’s closure of this strategic strait, which accounts for about 17% of global liquefied natural gas flow, could put up to 23% of the world’s LNG supply at risk.

JPMorgan’s commodities team estimates that supply losses could reach 3.3 million barrels per day by the eighth day of closure and 4.7 million barrels per day by the 18th day.

As of March 3, Iraq’s production has been cut by about 1.5 million barrels per day. The broker states that in the event of full shutdowns in the Gulf region, Brent crude oil prices could reach $100-$120 per barrel, compared to around $81 at the time of writing.

The TTF natural gas price assumption is $13 per million British thermal units in 2026 and $9.5 in 2027. European natural gas storage levels are near a ten-year low, with about 18% in Northwest Europe.

JPMorgan said: “This conflict has significantly altered the near-term risk distribution for oil and natural gas prices. Even if actual supply disruptions prove to be temporary, the geopolitical risk premium is likely to persist.”

Historical data in the report shows that oil prices tend to rise by about 30% within three months of major oil-producing country unrest, with supply losses averaging around 23% over six months.

EnQuest received the largest target price increase, from 11 pence to 25 pence, a 127% rise. Compared to the closing price of 17 pence, this implies a 47% upside.

The broker mentioned that Magnus may have a delivery with payment, ensuring 100% cash flow from Magnus, and contributing an estimated net asset value increase of 3 pence per share, along with refinancing of reserve-based loans in November.

EnQuest has the highest oil price sensitivity among JPMorgan-covered stocks, with operating cash flow changing by $85 million for every $10 per barrel move in oil prices. 2026 EBITDA is estimated at $508 million.

Var Energi maintains an “Overweight” rating with a target price of 44 Norwegian kroner, representing a 17% upside from the close of 38 kroner, plus about a 12% dividend yield. Its 2026 EBITDA is projected at $8.82 billion, up 26%, with free cash flow of $2.58 billion, up 75%. The stock has approximately 26% exposure to European natural gas.

Aker BP’s target price has been raised by 35% from 228 NOK to 308 NOK, compared to a close of 300 NOK. Due to $6.52 billion in capital expenditures in 2026, near-term free cash flow remains constrained. The Yggdrasil and Valhall projects are expected to start production in 2027. 2026 EBITDA is forecasted at $9.03 billion, up 22%.

Harbour Energy’s target price has been increased by 17% from 230 pence to 270 pence, compared to a close of 261 pence. The report notes that BASF has expressed intentions to “gradually monetize” its 47% stake and that net debt rose to $9.3 billion after acquiring LLOG. 2026 EBITDA is expected to be $7.24 billion, up 22%.

This article was translated with the assistance of artificial intelligence. For more information, please see our Terms of Use.