2 Predictions For Oil Stocks in April

Investor sentiment toward oil stocks is swinging dramatically amid events unfolding in the Middle East. That makes complete sense, given the scale of the geopolitical conflict in the region and its impact on global oil and natural gas supplies. Investors watching the energy sector shouldn't expect things to change in April, even if the conflict ends. Here's what you need to know.

There's a reason why Chevron and Exxon operate the way they do

Most long-term investors in the energy sector should stick to large, financially strong, and diversified industry giants like Chevron (NYSE: CVX) and ExxonMobil (NYSE: XOM). These two companies have proven they can survive the entire energy cycle while continuing to reward investors with reliable dividends. Each has increased its dividend for over 25 years.

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There are two important pieces to that success. First, Chevron and Exxon have exposure to the entire energy value chain, from production to transportation to chemical and refining. Each segment operates a little differently through the cycle, helping to soften the industry's normal ups and downs. Second, the two companies have the strongest balance sheets in their closest peer group. That allows Chevron and Exxon to take on debt during difficult periods to support their businesses and dividends.

This is important right now because the energy market is in flux. And that won't change in April, with the CEO of Chevron specifically warning that even if a resolution to the conflict is found, it will take time for the energy market to return to normal.

Predictions in April call for more of the same

So the first prediction for oil markets in April is for continued volatility. That said, oil prices are likely to remain well above their pre-escalation levels. While emotions will drive oil prices higher and lower, the industry can't simply change directions on a dime. In fact, as the world assesses the impact of the conflict, a higher-for-longer outcome seems most likely. One month won't be enough to bring oil prices down.

The second prediction is that integrated energy giants Chevron and Exxon will remain among the safest ways to invest in the energy sector. They will benefit as businesses from high oil prices, but their diversification and financial strength will allow them to continue paying generous dividends throughout the conflict and, more importantly, after it ends. Chevron's yield is 3.4%, while Exxon's is 2.5%.

Don't buy oil stocks because of the conflict's impact on prices

Long-term investors should have some exposure to energy stocks, given the industry's importance to the world. However, most should take a conservative approach to the sector, sticking to financially strong and diversified industry giants like Chevron and Exxon. That will be as true in April 2026 as it will be in 10 years. History shows very clearly that high oil prices don't last in the volatile, commodity-driven energy industry.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.