USO bucked the trend with gains in premarket trading even as most oil stocks slipped despite oil climbing above $100.
- Brent rose past $103, and WTI neared $97 as attacks on infrastructure and Hormuz shipping bottlenecks tightened supply.
- Analysts said higher oil prices reinforce a “higher for longer” Fed outlook, lifting inflation risks and delaying rate cuts.
- Moody’s economist Mark Zandi warned rising oil could push recession odds higher, though Morningstar still sees limited long-term upside.
Oil climbed back above $100, but most energy stocks traded lower before the bell on Tuesday, highlighting a mixed reaction across the sector as analysts flagged renewed risks to inflation and the Federal Reserve’s policy path.
The move follows a rebound in crude prices after a brief pullback, with Brent climbing above $103 per barrel and West Texas Intermediate trading near $97 per barrel.
Shares of Trio Petroleum (TPET) were down nearly 1%, Indonesia Energy (INDO) slipped 0.3%, and EON Resources (EONR) fell about 5%, while United States Oil Fund (USO) bucked the trend, jumping over 5%.
Oil Gains On Shipping Disruptions
Oil rebounded in recent sessions as Iran continued attacks on energy infrastructure, with operations halted at the UAE’s Shah gas field, an Iraqi oil site hit, and crude loadings from Fujairah disrupted again. The conflict, now in its third week, has pushed shipping through the Strait of Hormuz close to a standstill, tightening global supply and impacting Asian demand.
Brent climbed back above $103 after a brief drop, while WTI hovered near $97. The U.S. signaled it could expand strikes on Iranian oil assets, even as it continues to allow some crude flows through Hormuz. Meanwhile, the UAE and Kuwait have cut output, and Saudi Arabia is ramping up alternative export routes, underscoring the growing strain on supply chains.
Crude Rally Clouds Fed Rate Cut Outlook
Analysts said the oil spike is feeding directly into the macro narrative around interest rates. Research firm StoneX said the surge in oil prices reinforces a “higher for longer” outlook for the Federal Reserve, adding that the longer the Strait of Hormuz stays technically hostile, the greater the chance that oil prices stay higher for longer, Dow Jones noted.
He noted that such a scenario could delay rate cuts and keep the U.S. dollar supported as markets reassess the Fed’s policy trajectory.
Meanwhile, Phillip Nova said oil holding near $100 per barrel is already feeding into inflation, pointing to U.S. diesel prices crossing $5 per gallon. “The burn from elevated oil prices is being felt,” she said, adding that even emergency reserve releases have failed to ease supply disruptions. The brokerage added that the war-driven risk premium in oil remains intact, with markets now focused on the duration of the conflict and the extent of damage to energy infrastructure.
Recession Warning Gets Louder
Moody’s economist Mark Zandi warned on X that the surge in oil prices could push the economy closer to a downturn. He said recession probability was already near 49% before the conflict and could rise further, noting that “every recession since WWII, save the pandemic recession, has been preceded by a spike in oil prices.”
Zandi added that if oil remains elevated for weeks rather than months, “a recession will be difficult to avoid,” as higher energy costs hit consumers quickly.
However, not all analysts see sustained upside. Morningstar maintained its $65 per barrel mid-cycle forecast for Brent, assigning a low probability of raising it from the possible destruction of Iran’s oil infrastructure. However, the firm acknowledged that prolonged supply bottlenecks could trigger demand destruction and broader economic stress. It said U.S. shale producers, Canadian crude and refiners could benefit, while companies with Middle East exposure may face headwinds.
How Did Stocktwits Users React?
On Stocktwits, sentiment was ‘bullish’ for USO amid ‘extremely high’ volume and INDO amid ‘low’ volume, while TPET saw ‘bearish’ sentiment amid ‘normal’ activity and BATL remained ‘bearish’ amid ‘low’ volume. EONR stood out with ‘extremely bullish’ sentiment amid ‘extremely high’ message volume.
Over the past year, USO has risen 59%, INDO gained 61%, BATL surged over 1,200% and EONR climbed 200%, while TPET declined 8%.
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