Top-2 U.S. Energy Names to Buy as Iran Conflict Changes Energy Sector

The regional conflict with Iran has effectively closed the Strait of Hormuz for nearly two months now.

Previously, approximately 20% of global oil supplies as well as many other energy and commodity products traversed this critical and narrow chokepoint. Some work arounds have been more fully utilized to move oil out of the region, but the impacts on energy and commodity prices have been significant. The situation will get worse each week that this traffic is not normalized.

The war has significantly changed the dynamics of the world’s energy markets. Saudi Arabia and other Gulf countries will spend tens or hundreds of billions of dollars in the coming years building out pipelines and other infrastructure to be able to bypass this key water way in the future.

Closer to home, this conflict has been somewhat of a coming out party for the U.S. becoming the largest energy giant in the world — something that would have been utterly unthinkable prior to the Great Financial Crisis, and more importantly, the shale revolution that soon followed. The U.S. is already the largest LNG exporter on the globe and will be adding to this lead in the years ahead.

Today, I am going to highlight two energy names that will benefit from these developments.

U.S. shale players are beginning to respond to higher energy prices. Continental Resources (CLR) announced earlier this month that it was boosting this year’s capital expenditure budget to $1.3 billion from $850 million and will increase production. Also, this month, Enverus stated it now sees U.S. supply rising by 240,000 barrels per day in 2026 to a record 13.9 million. Previously, they were projecting a decline of 100,000 barrels a day this year.

These are positive developments for Halliburton (HAL) which has been a leading oilfield services player in North America for decades now. The company recently noted it was seeing some new signs of life in oilfield activity across North America. Halliburton posted Q1 numbers that beat both top- and bottom-line expectations earlier this week. The stock is reasonably priced and has a 1.75% dividend yield. I added slightly to my stake in Halliburton this week via covered-call orders.

I used the same method to boost my stake some in NextDecade Corporation (NEXT) this week as well. This is much riskier proposition as the company will not be profitable for many years. NextDecade is developing natural gas liquefaction and export facilities and is strategically positioned to take advantage of natural gas output from shale from the Eagle Ford and Permian regions.

The firm is constructing its first five liquefaction trains with the first two projected to come online in 2027. NextDecade has long-term contracts in place for the majority of this production. The company appears to benefit from the U.S. continue to expand its role as an LNG powerhouse. NextDecade will be a beneficiary if Europe follows through and bans all natural gas exports from Russia by 2027 as well.

And that is how I am trying to make lemonade as the continued closure of the Strait of Hormuz is producing plenty of lemons for the global economy.

At the time of publication, Jensen was long HAL and NEXT.