New york: US energy stocks surged to near-record levels on Tuesday as oil prices climbed and the likelihood of a US-Iran agreement waned, bolstering the earnings outlook for producers and refiners. The S and P 500 Energy Sector Index increased by up to 1.8% during trading, positioning it for its first record close since March 27. The index has risen approximately 20% since reaching a recent low on July 1.
According to Anadolu Agency, energy shares had previously dropped 16% from their March peak due to a temporary easing of hostilities and expectations that negotiations between Washington and Tehran might reduce disruptions in the Strait of Hormuz. However, these expectations have diminished after US President Donald Trump expressed disinterest in extending an interim agreement with Iran, heightening concerns that restrictions on energy flows through the strategic waterway could persist.
International benchmark Brent crude surged to around $91 a barrel on Tuesday, its highest level in nearly three weeks, while US benchmark West Texas Intermediate traded around $85. Oil prices have increased for three consecutive sessions, with Brent gaining approximately 50% since the start of the year as Middle East conflicts and supply constraints have tightened global energy markets.
The surge in commodity prices has significantly boosted profits and cash generation across the US energy sector. Chevron's second-quarter earnings per share rose by more than 240% year-on-year, while ExxonMobil recorded a 115% increase. Exxon reported quarterly earnings of $14.5 billion, and Chevron posted a record $12.1 billion profit.
US refiners have also reaped benefits from tight supplies and elevated margins. Valero Energy reported its most profitable quarter on record on a per-share basis, while PBF Energy and HF Sinclair achieved their strongest earnings in years.
The energy sector's rally contrasted with losses in the broader US equity market on Tuesday, as rising oil prices, higher Treasury yields, and weakness in technology shares weighed down major indices. Nevertheless, energy companies remain vulnerable to a potential decline in earnings if a US-Iran agreement eases supply risks and leads to lower crude prices.