Donald Trump’s announcement of a blockade of Iran sent oil prices soaring and the Dow falling.
Geopolitical conflict in the Middle East is not good news for the world. Not only is there destruction and loss of life, but energy markets are not functioning properly. Oil and natural gas are commodities, so a decrease in supply causes their prices to rise. We’re already seeing the impact at the gas pump, but higher energy prices will eventually raise the prices of other products as well.
Here’s what you need to know about what’s happening and why companies like it. ExxonMobil (XOM +1.81%) and chevron (CVX +1.00%) It is likely to be the best energy investment option for most investors.
Image source: Getty Images.
This is not a new development.
Energy prices have been falling since Iran and the United States agreed to a deal. However, these talks did not go as well as hoped as US President Donald Trump announced that Iranian ports would be blocked again. Oil prices soared, and the entire market fell as this news spread. Emotions and news flows are driving commodity and stock markets. This is completely normal.
today’s change
(1.81%) $2.74
current price
$154.45
Key data points
market capitalization
work range
$152.95 – $154.80
52 week range
$105.53 – $176.41
volume
13.8M
average volume
16.8M
gross profit
20.92%
dividend yield
2.69%
In fact, the energy sector is well known for its volatility. Oil and natural gas prices are influenced by geopolitical conflicts, economic activity, natural disasters, and supply and demand dynamics. Price fluctuations can be large and surprisingly fast. Current events in the Middle East may be making headlines, but they are just the latest example of a long-term trend you need to address if you own energy stocks.
That’s why most investors should stick to large, well-diversified energy giants like Exxon and Chevron. Not only are the two companies the world’s largest energy companies, but their globally diverse and integrated businesses span the entire energy value chain. This diversification helps mitigate the impact of commodity price fluctuations. It is also a financially strong company with a debt ratio of approximately 0.2x and 0.25x, respectively. These would be impressive numbers for any company.
today’s change
(1.00%)$1.91
current price
$192.98
Key data points
market capitalization
work range
$191.94 -$193.70
52 week range
$146.49 -$214.71
volume
6.1 million
average volume
9.4M
gross profit
15.15%
dividend yield
3.65%
Meanwhile, Exxon and Chevron are also reliable dividend stocks with yields of 2.7% and 3.7%, respectively. They have increased their dividends every year for decades, despite the energy sector’s inherent volatility. This is important because it allows you to focus on dividend checks rather than oil prices during periods when raw material volatility is inevitable.
Don’t “play” with oil prices. Invest in stable energy business
When investors see major world events, they are tempted to capitalize on them. However, for oil and gas, volatility is very normal, so this is a very risky approach. Most investors would be better off accepting volatility and adjusting their stock selections to account for it. Exxon and Chevron are proven survivors with excellent dividend track records and attractive yields. This is a good full-cycle option for most investors in the energy patch, not just dividend enthusiasts.
