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5 Top-Ranked Oil Stocks to Buy as US-Iran Tensions Escalate

Swarup Gupta
If Iran interrupts crude supplies more severely, prices could increase by several hundred dollars a barrel.

A tweet by President Trump on Sunday, addressed to his Iranian counterpart Hassan Rouhani, initially lifted crude prices on Monday. Prices eventually closed marginally lower due to other factors, but chances of military conflict between the United States and Iran remain. Analysts think Brent crude is already headed toward $90 a barrel, due to fresh U.S. sanctions on Iran.

If Iran interrupts crude supplies more severely, prices could increase by several hundred dollars a barrel. This could easily outweigh increased supply from OPEC and its allies and a decline in demand due to the U.S.-China trade war. Given the prospects of tighter supplies in the days ahead, investing in oil stocks looks like a profitable option.

Trump’s Tweet Boosts Crude Price

On Sunday, Trump tweeted a warning to his Iranian counterpart. The President said Iran would "SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE" if Hassan Rouhani ever threatened the United States again.

The tweet seemed to be aimed at comments made by Rouhani over the weekend. The Iranian president had cautioned the United States over its hardline policies, stating that though “Iran’s power is deterrent,” the country’s enemies must realize “war with Iran is the mother of all wars.”

Trump’s tweet possibly caused Brent crude to hit $74.50, before closing a penny lower at $73.06 a barrel. WTI crude also lost 0.5% to close at $67.89 a barrel. OPEC and its allies’ decision to step up production a decline in global crude demand seemed to outweigh U.S.-Iran tensions.

Tough Iranian Stance Could Cause Supply Squeeze

Analysts think markets ignored these tensions on Monday since Trump is unlikely to follow up on his threats, despite his belligerent tweet. However, his inner circle of advisors, which includes Secretary of State Mike Pompeo and national security advisor, John Bolton, are known for their hawkish stance on such issues.

On Monday, Bolton said that Trump had told him that if Iran adopts an aggressive stance, it will have to “pay a price like few countries have ever paid before.” This means that even though a full-fledged war is not imminent, chances of a military incident in the Persian Gulf are increasing.

Over the weekend, Iran has once again threatened to close the Strait of Hormuz, a crucial seaborne passage for global crude shipments. Analysts feel that this could boost Brent crude price significantly. The international benchmark is already headed toward $90 a barrel, according to some market watchers, given that the Trump administration is unlikely to issue sanction waivers.  

Our Choices

Comments made by the Iran’s president and the aggressive response by his U.S. counterpart have once again threatened global crude supplies. Though analysts have ruled out a full-fledged war, the prospects of a military incident in the Persian Gulf are rising.

Such an incident could boost oil prices significantly in the days ahead. This is why investing in oil stocks looks like a prudent option. However, picking winning stocks may be difficult.

This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score. 

We have narrowed down our search to the following stocks, each of which has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

ConocoPhillips COP is the largest oil and gas exploration and production player in the world.

ConocoPhillips’ expected earnings growth for the current year is more than 100%.The Zacks Consensus Estimate for the current year has improved by 4.4% over the last 30 days.

Canadian Natural Resources Limited CNQ is a senior independent oil and natural gas exploration, development and production company.

Canadian Natural Resources’ expected earnings growth for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by 5.8% over the last 30 days.

Northern Oil and Gas, Inc. NOG is an exploration and production company of oil and natural gas properties in the United States.

Northern Oil and Gas’s expected earnings growth for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by 7.8% over the last 30 days.

CVR Refining, LP CVRR is engaged in the refining of petroleum primarily in the United States.

CVR Refining’s projected growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by 2.3% over the last 60 days.

Mammoth Energy Services, Inc. TUSK is an oilfield services provider with a variety of equipment, maintenance, and engineering and construction offerings to the energy sector.

Mammoth Energy’s expected earnings growth for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by 9.8% over the last 30 days.

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CVR Refining, LP (CVRR) : Free Stock Analysis Report
 
Canadian Natural Resources Limited (CNQ) : Free Stock Analysis Report
 
Northern Oil and Gas, Inc. (NOG) : Free Stock Analysis Report
 
ConocoPhillips (COP) : Free Stock Analysis Report
 
Mammoth Energy Services, Inc. (TUSK) : Free Stock Analysis Report
 
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