Oil Climbs to a 1-Month High as the U.S. and Iran Trade Attacks in the Strait of Hormuz. Here's What it Means for Energy Investors.

Oil prices spiked on Tuesday to above $87/barrel: their highest levels in more than a month as the U.S. announced it would impose a naval blockade on Iran in the Strait of Hormuz. The move is in response to Iran’s attacks on regional U.S. allies and passing ships traversing the Strait.

A return of higher oil prices is unwelcome news for American consumers. Even big oil companies – which theoretically stand to benefit when oil prices are high – may not be thrilled with this latest development. Here’s what the oil price spike means for energy investors.

Image source: Getty Images.

Where oil prices stand now

Benchmark Brent Crude spiked to above $87/barrel on Tuesday before settling back to about $85.15/barrel at 4:00 p.m. Eastern Time, when the blockade of the Strait of Hormuz was scheduled to take effect.

That spike took Brent Crude to its highest level in a month, a 21% increase over its July 1 price of $71.57/barrel. Although the Brent Crude price is down from its May peak of $114.44/barrel, it could push higher if the blockade causes the Strait to shut down again.

What’s next for energy investors

With the U.S. now officially calling the ceasefire over, markets are skittish. And skittish markets usually lead to share price volatility.

Indeed, at the onset of the Iran war in late February, shares of the three largest U.S. oil companies – ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX), and ConocoPhillips (NYSE:COP) – rose more than 10% in March and April before sinking over 20% in May and June, then rebounding in July.

U.S. oil companies are generally well-positioned to weather Middle East supply disruptions because most of their production is located elsewhere, allowing them to benefit from the higher prices that arise from global supply constraints while experiencing limited impact on their own supply.

Sure enough, all three companies reported year-over-year revenue increases of between 10% and 15% in the first three months of 2026. But a long period of high global oil prices could actually hurt the oil companies.

Hedging your bets

Everyone knows how volatile oil and gas prices can be. That’s why the industry has adopted several practices to help it succeed over the long term, and not just when oil prices are high.

One of these practices is hedging, in which a company locks in a price months in advance. Before the war began, oil prices were relatively low due to a global oversupply, and many producers worried they might fall further, so they locked in prices much lower than today’s. That prevents them from fully reaping the benefits of a big oil price spike. ExxonMobil, for example, reported $700 million in reduced earnings due to hedging in Q1.

Hedging notwithstanding, oil price volatility can at best provide an oil company with a temporary windfall. But volatility actually impedes long-term growth. That’s because oil companies are reluctant to incur the high cost of drilling new wells unless they know the wells will eventually pay for themselves. Because a swift resolution to the war in Iran could send oil prices sharply downward at any time, oil companies are reluctant to commit to drilling those new wells.

ExxonMobil, for example, attributed its Q1 revenue increase not to higher oil prices, but to additional production coming online from its offshore operations in Guyana. The company began oil exploration in Guyana in 2008, but only started production there in 2019. That’s the kind of long-term certainty that oil companies look for when deciding whether to bring production online, and the current price spike doesn’t qualify.

The upshot for energy investors is that the war in Iran is a major global event with an unpredictable trajectory. It’s very likely to make oil company stocks bounce around quite a bit in the short term. But it’s unlikely to change the long-term thesis for major oil companies like ExxonMobil, Chevron, or Conoco. Smart investors will stay the course.

John Bromels has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends ConocoPhillips. The Motley Fool has a disclosure policy.