Shares of US energy companies rise as Middle East crisis fuels supply concerns

The shares of U.S. Energy companies rose in premarket trading on Wednesday. This was due to the rise in oil prices, which was a result of concerns about a possible escalation in tensions in Middle East.

Iran's missile strike on Israel and Washington's full response

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The markets went into a risk off mode after the announcement. The demand for safe-haven currencies such as the Japanese yen, Swiss franc and oil stocks was strong.

Benchmark Brent crude rose by 2.8% to $75.59 per barrel while U.S. crude climbed 3% to $71.92.

Matthew Ryan, director of Ebury's market strategy, said that the involvement of Iran was a worrying development for the markets. Investors were right to be concerned about a possible disruption of global oil supply by Israel.

Iran is one of the major players on the oil market, accounting for 5% or so of global production.

Exxon Mobil (U.S.) and Chevron (U.S.) both rose by 1.6% and 1.5% respectively.

ConocoPhillips and Occidental Petroleum, as well as Devon Energy, are major oil and gas producers. They all gained between 1.5% to 1.9%. Oilfield services firms SLB and Halliburton also rose by about 2%.

Analysts expect that the market will remain "jittery", as investors wait for Israel's retaliation, and its impact on the supply.

Ryan said that the markets are likely to be affected by a possible sharp rise in oil prices, as well as a new period of high energy costs and consumer inflation.

The ramifications of the invasion will not be as severe as those that followed.

Premarket, shares of U.S. Defense companies Lockheed Martin (up 1.5%) and RTX (up 1.5%) also rose.

In the past three years, there have been a few brief increases in defense stock due to a rise in weapons demand.

(source: Reuters)