If Iran Closes the Strait of Hormuz, These 3 U.S. Oil Stocks Could Soar

Core Viewpoint - The ongoing conflict between Israel and Iran may lead to a blockade of the Strait of Hormuz, which could significantly impact global oil prices and create investment opportunities in U.S.-focused oil and gas companies [1][2]. Group 1: Impact of Geopolitical Events on Oil Prices - A potential blockade of the Strait of Hormuz could cause a spike in oil prices in the short term, while stock prices may decline [2]. - Companies with significant U.S. operations are likely to benefit from rising oil prices due to geopolitical tensions [2]. Group 2: Company Analysis - ConocoPhillips - ConocoPhillips is a major U.S.-based oil and gas company, with approximately 75% of its operating earnings derived from the contiguous U.S., Canada, and Alaska [4][5]. - The company trades at a low valuation of 11.6 times earnings and offers a 3.4% dividend yield, indicating a low-growth outlook [6]. - For every $1 increase in Brent crude oil prices, ConocoPhillips expects an increase in operating cash flow of $65 million to $75 million, and for West Texas Intermediate, an increase of $140 million to $150 million [6]. Group 3: Company Analysis - EOG Resources - EOG Resources operates primarily in U.S. shale plays and has no exposure to the Strait of Hormuz, making it less vulnerable to geopolitical disruptions [9]. - The company has doubled its dividend from 2021 to 2024, now yielding 3.3%, and has increased total shareholder payouts from 48% to 98% of free cash flow [10]. - EOG has achieved higher-than-average oil and gas price realizations due to its strategic positioning near low-cost pipelines, allowing it to benefit disproportionately from oil price spikes [11][12]. Group 4: Company Analysis - Occidental Petroleum - Occidental Petroleum, a Warren Buffett holding, derives about 84% of its production from the U.S., with significant operations in the Permian Basin [13][14]. - The company has a deep onshore inventory with breakeven prices below $60 per barrel, and it has reduced well costs by 12% since 2023 [14]. - Occidental's higher debt load, particularly after a $12 billion acquisition, is a factor for investors to monitor, but it may offer more upside as a leveraged play on U.S. oil and gas [16].