The Best Oil Stock to Own During Geopolitical Uncertainty

The price of Brent crude oil has surged by more than 70% this year to over $100 per barrel. Most of that increase occurred after the U.S. and Israel launched airstrikes against Iran in late February, sparking a regional conflict and curbing oil shipments through the Strait of Hormuz.

Many investors pivoted back toward oil stocks as the conflict intensified, but some of those stocks could lose their momentum once it ends. Therefore, it's smarter for investors to stick with more balanced midstream stocks, which are more insulated from volatile oil prices than upstream extraction companies and downstream refineries. One of those top midstream plays is Energy Transfer (NYSE: ET), which will deliver predictable returns in these uncertain times.

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Why is Energy Transfer an evergreen investment?

Energy Transfer operates more than 140,000 miles of pipeline across 44 states. It delivers natural gas, liquefied natural gas (LNG), natural gas liquids (NGLs), crude oil, and other refined products through its pipes, and it also exports its products to over 80 countries and territories.

As a midstream company, Energy Transfer charges upstream and downstream companies "tolls" to use its infrastructure. It indirectly benefits from higher oil prices, which drive those companies to ramp up their production. Still, it can continue growing even if oil prices decline -- since it only needs those resources to keep flowing through its pipelines.

Those tolls fund its distributable cash flow (DCF), which it uses to cover its distributions. As a master limited partnership (MLP), it blends a return of capital with its own profits to pay more tax-efficient distributions. Over the past five years, its adjusted DCF has easily covered its annual distributions -- even as the pandemic, inflation, rising interest rates, geopolitical conflicts, and other macro headwinds rattled the global economy.

Data source: Energy Transfer.

That resilience indicates its forward yield of 6.7% is easily sustainable. For 2026, analysts expect its earnings per unit (EPU) to rise 20% to $1.46. At $20 per share, Energy Transfer still looks like a bargain at less than 14 times that estimate.

Energy Transfer won't benefit from soaring oil prices as much as upstream companies like Occidental Petroleum or diversified energy leaders like Chevron. Still, it's a stable way for income-seeking investors to profit from the same tailwinds.

Leo Sun has positions in Energy Transfer. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.