Oil Prices Are Soaring Higher Amid Fears of Re-Escalation With Iran. Here's What Energy Investors Need to Do Right Now.

Oil prices are surging today. WTI, the primary U.S. oil price benchmark, jumped more than 10% to over $110 a barrel. Meanwhile, Brent, the global benchmark price, rallied 6% to more than $107 per barrel. Crude prices are soaring following President Trump's address to the nation on Wednesday night, where he threatened to hit Iran "extremely hard."

Here's a look at what energy investors should do right now.

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The current situation

Military strikes by Israel and the U.S. against Iran have led the country to retaliate by attacking the global energy market. It has struck crude oil tankers in the Persian Gulf, effectively closing the Strait of Hormuz and grinding shipping traffic to a halt. Before the war, 20% of the world's oil and liquefied natural gas (LNG) exited the Persian Gulf through the Strait of Hormuz each day. Additionally, Iran has attacked energy infrastructure in the region, causing damage to key LNG infrastructure in Qatar.

President Trump's speech roiled the energy markets. He didn't lay out a strategy to reopen the Strait of Hormuz. Instead, the President wants other countries that rely on the Persian Gulf for their energy needs to reopen the Strait. That caused concerns that it could remain closed for much longer, risking further damage to the global economy.

While the U.S. has no plans to force Iran to reopen the Strait, Reuters reported today that about 40 other countries are discussing joint action to reopen the key oil chokepoint. They plan to evaluate both diplomatic and military options to ensure the free flow of oil, LNG, and other commodities out of the Persian Gulf.

Oil could remain higher for longer

The energy market initially expected the war with Iran wouldn't last long, leading to a short-term closure of the Strait of Hormuz. However, it now appears this key waterway could remain closed for a while. As a result, oil prices could continue to rise and remain elevated, as it will take time to restart shut-in production once tanker traffic resumes.

While oil prices have spiked this year, most oil stocks haven't matched crude's rise. For example, shares of oil giants Chevron (NYSE: CVX) and ExxonMobil (NYSE: XOM) are up only about 30% on the year, even though oil prices have doubled. As a result, they could have a lot further to run if crude prices remain high.

Both companies should generate huge profit windfalls this year. Chevron initially expected to grow its free cash flow by $12.5 billion in 2026, driven by recently completed expansion projects and its acquisition of Hess, assuming oil averaged $70 a barrel. That number will be much higher if crude remains in the triple digits. Meanwhile, Exxon's cost-savings and high-return expansion projects position it to deliver double-digit annual earnings growth at constant commodity prices and margins. Given their robust growth potential at lower oil prices, they have meaningful untapped upside if crude prices stay high.

Oil stocks remain attractive despite surging crude prices

Oil prices are soaring again today. Despite that, shares of Chevron and Exxon have barely budged. With oil prices likely to remain high for a while, energy investors should consider adding to their positions now to capitalize on the untapped upside.

Matt DiLallo has positions in Chevron. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.