The Strait of Hormuz Is Choking the World's Oil Supply. These Stocks Could Win.

The Strait of Hormuz is a major artery in the global energy trade. The closure of this vital waterway is choking the supply of oil and natural gas. When supply is constrained in a commodity market, prices rise. In fact, Goldman Sachs (NYSE: GS) just updated its oil model, saying oil prices will likely remain higher for longer.

Integrated energy giant BP's (NYSE: BP) first-quarter earnings hint at what is to come. The company's profit more than doubled year over year, as rising oil prices more than offset the impact of supply disruptions. The stock is up more than 30% so far in 2026, as of this writing. It isn't the only company that will benefit.

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The more focus, the better?

What is interesting about BP is that it is the integrated energy giant with the weakest balance sheet, with a debt-to-equity ratio more than twice that of its closest peers. Essentially, it is the most aggressive option of its peers. It is also likely to benefit most, as lofty energy prices will aid the company in its effort to reduce leverage.

Still, all of the integrated energy companies will benefit mightily from rising oil and natural gas prices. However, companies focused entirely on energy production will likely benefit even more. For example, Diamondback Energy (NASDAQ: FANG) is a U.S. oil and natural gas producer. Its top and bottom lines are entirely driven by commodity prices, and, notably, its location means that it won't face any business disruption from the Middle East conflict. The stock is up 35% this year. When the company reports earnings on May 5, it is likely to be good reading.

What goes up will eventually come back down

The problem with BP and Diamondback Energy boils down to the risk/reward trade-off investors are making. Yes, they will both do well in an environment of rising oil prices. But energy markets will eventually recover, and commodity prices will eventually fall. That is what history has repeatedly shown is normal in the energy sector. When that happens, higher-risk and more-focused energy businesses will likely bear the brunt of the energy downturn.

The geopolitical conflict in the Middle East has investors focused on short-term profits that some energy companies are expected to make. That's fine, but if you are a long-term investor, you need to think about the kind of business you would want to own through the entire energy cycle. Erring on the side of caution with financially strong integrated energy giants, such as Chevron (NYSE: CVX), or fee-based energy businesses, such as midstream-focused Enterprise Products Partners (NYSE: EPD), is probably a better call than focusing only on the companies most likely to benefit in the short term.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron and Goldman Sachs Group. The Motley Fool recommends BP and Enterprise Products Partners. The Motley Fool has a disclosure policy.