President Trump announced that the U.S. and Iran had reached a two-week ceasefire agreement hours before his deadline last night. As part of the deal, Iran agreed to allow ships to safely pass through the Strait of Hormuz. The news sent stock prices soaring and oil prices crashing on Wednesday. Brent, the global oil benchmark, tumbled more than 13% to around $95 a barrel.
Here’s a look at what could happen to leading U.S. oil stocks ConocoPhillips (COP 4.83%) and Occidental Petroleum (OXY 5.02%) if the ceasefire holds.
Image source: Getty Images.
The ceasefire is very fragile
Despite the ceasefire, hundreds of ships remain stranded on both sides of the Strait of Hormuz. Before the war, 20% of global oil and LNG supplies moved through that waterway each day. However, Iranian attacks on ships and insurance issues have slowed traffic to a crawl. It hasn’t yet improved following the ceasefire because Iran has halted oil tanker traffic due to Israeli attacks on Iranian-backed Hezbollah in Lebanon.
Additionally, there have been several other attacks on oil infrastructure in the Middle East since the ceasefire. A drone reportedly struck Saudi Arabia’s East-West pipeline, which the country has been using to partially bypass the Strait by exporting oil out of the Red Sea. Iran also reportedly hit an oil export terminal on the Red Sea and some facilities in Kuwait.
If the ceasefire holds
Despite those early hiccups, the oil futures market is pricing in an end to the conflict. While the current Brent contract (June delivery) trades at nearly $95 a barrel, the December contract prices oil at less than $80 a barrel. Meanwhile, futures contracts for WTI, the primary U.S. oil price benchmark, are trading in the mid-to-low $70s a barrel for deliveries this fall.
Today’s Change
(-5.02%) $-3.16
Current Price
$59.78
Market Cap
$62B
Day’s Range
$56.25 – $59.98
52wk Range
$34.78 – $67.45
Volume
1.5M
Avg Vol
16M
Gross Margin
31.94%
Dividend Yield
1.56%
These futures contracts suggest the market expects oil to steadily decline as the Strait reopens for business. This decline could put downward pressure on oil stocks. Shares of ConocoPhillips and Occidental Petroleum are down more than 5% today amid the slump in crude oil prices. However, their shares might not fall too far. While ConocoPhillips’ stock has gained 32% this year and Occidental’s shares are up about 43%, both have underperformed the more than 60% surge in crude prices. That’s due to the market’s belief that the war will only cause a short-term disruption to the oil market and that oil prices will be much lower later this year.
However, oil prices will likely remain much higher on average this year, meaningfully boosting their cash flows. Both oil companies expected that cost savings alone would add over $1 billion to their annual free cash flow this year with no change in oil prices. Meanwhile, higher oil prices will provide an additional boost. For example, every $1 increase in the price of WTI will increase ConocoPhillips’ annual cash flow by over $140 million and boost Occidental’s by $240 million.
Even lower oil prices ahead if the ceasefire holds
Oil prices have already come down sharply since last night’s ceasefire announcement. They’ll likely continue falling if it holds. While that will presumably put additional downward pressure on shares of ConocoPhillips and Occidental, they’re still on track to make a lot more money in 2026, given the likelihood that oil prices will be higher on average this year.