3 High‑Conviction Energy Stocks on Wall Street's Radar as the Iran War Keeps Oil Markets on Edge

Nearly seven weeks have passed since the U.S. and Israel attacked Iran. The war with Iran has caused turmoil for global energy markets. Traffic through the critical Strait of Hormuz has been disrupted, first by Iran and now by the U.S.

Perhaps a peaceful resolution can be found quickly. However, there's no guarantee that a lasting agreement satisfactory to all parties will be reached anytime soon. What should investors do? Here are three high-conviction energy stocks on Wall Street's radar as the Iran war keeps oil markets on edge.

Image source: Getty Images.

1. Chevron

Chevron (NYSE: CVX) is an unsurprising choice for Wall Street analysts amid the current uncertainty. When Middle East oil supplies are at risk, the company's strong Permian Basin operations in the U.S. make it an automatic winner.

The Permian Basin isn't Chevron's only major focus, though. The oil and gas giant is a leader in the Gulf of Mexico. It produces oil in the Bakken Basin and Denver-Julesburg (DJ) Basin. Chevron also has significant operations outside the U.S. (but well away from the Middle East), including those in Argentina and Guyana.

Wall Street especially likes Chevron's low-cost production. The oil and gas giant can fully fund its dividends and planned capital expenditures if oil fell below $50 per barrel. The price is nearly twice that level now.

Speaking of dividends, Chevron's forward dividend yield tops 3.8%. The company has increased its dividend for 39 consecutive years. Management ranks growing the dividend among the top financial priorities.

Chevron expects to grow its earnings per share and adjusted free cash flow by more than 10% per year. With this strong growth combined with a juicy dividend, this oil stock should be on more than just Wall Street's radar.

2. ExxonMobil

Analysts like ExxonMobil (NYSE: XOM) for many of the same reasons they like Chevron. But ExxonMobil has even more expansive operations than Chevron. It ranks as the world's second-largest energy company by market cap, trailing only Saudi Aramco.

ExxonMobil has been the top-performing energy-sector investment over the past few years, based on total shareholder return. It has also delivered higher cash flow growth than its rivals. As a bonus, ExxonMobil boasts one of the strongest balance sheets.

The company is well-positioned for future growth. ExxonMobil expects to increase its earnings by $25 billion compared to its 2024 level by the end of the decade. It projects an additional $35 billion of free cash flow by 2030. Looking further into the future, ExxonMobil expects its total addressable market, including both new and existing businesses, to double from 2030 to 2050 to roughly $8 trillion.

This stock has been a longtime favorite for income investors. ExxonMobil has increased its dividend for 43 consecutive years. Its dividend yield currently stands at 2.8%.

3. Energy Transfer

Wall Street analysts don't just have integrated oil giants like Chevron and ExxonMobil on their radar. They also view midstream energy leader Energy Transfer (NYSE: ET) highly. Of the 21 analysts surveyed by S&P Global (NYSE: SPGI) this month, 18 rated the pipeline stock as a "buy" or "strong buy."

Energy Transfer's business isn't price-driven, so soaring oil and gas prices don't boost revenue. However, the supply disruption in the Middle East has driven demand for U.S. oil and gas higher. And that does directly benefit Energy Transfer.

The company owns more than 140,000 miles of pipeline spanning the U.S. It transports around 32 million BTUs per day of natural gas and 7 million barrels per day of crude oil. In addition, Energy Transfer fractionates (separates hydrocarbons into their components) roughly 1.1 million barrels per day of natural gas liquids (NGLs).

This midstream leader offers a distribution yield of 7.1%. Management expects to increase the distribution by 3% to 5% per year over the long term.

Keith Speights has positions in Chevron, Energy Transfer, and ExxonMobil. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.