In 2026, Exxon Mobil’s (XOM) stock price has risen by nearly 18%, while the S&P 500 has remained essentially flat over the same period. This movement stems from a surge in oil prices triggered by the conflict in the Persian Gulf. However, there is a clear divergence in the market regarding whether the stock is still worth holding at this point.
Bulls argue that the market has underestimated the possibility of “higher for longer” oil prices. Earlier oil futures analysis suggested that the market expected the impact of the conflict on oil prices to be relatively short-lived, with prices falling back to lower levels by autumn. But this view may be overly optimistic, as the conflict is far from resolved, the Strait of Hormuz is blocked, and no agreement has been reached on the conditions for reopening. Furthermore, there are significant questions regarding shipping insurance coverage, the extent of damage to energy infrastructure in the region remains unclear, and the risk premium that energy buyers will need to bear when purchasing energy products from Arabian Peninsula countries is also difficult to determine. Bulls therefore believe that, as long as the strait remains closed, Exxon Mobil should be on the list of no-brainer buys.
Bears are divided into two camps. The first camp believes that the oil futures market is correct and that oil prices will fall sharply in the coming months. If that happens, buying Exxon Mobil for what might be only one or two quarters of relatively high prices would be a mistake. The second camp agrees with the “higher for longer” oil price thesis but does not consider Exxon Mobil the best way to play this theme. This camp points out that Exxon Mobil has exposure to Qatar through its liquefied natural gas investments, and its downstream operations rely more on the spread between crude oil and refined products than on oil price volatility. Moreover, even if oil prices rise, the company remains fundamentally a low-growth, relatively low-return-on-equity business with limited ability to significantly increase production.
Exxon Mobil’s earnings and cash flow over the next five years are expected to grow only at low single-digit rates, meaning the stock requires higher oil prices to justify its current 2.7% dividend yield. Against the backdrop of the U.S.-Israel conflict with Iran, Goldman Sachs research shows that the primary driver of upward revisions to S&P 500 earnings expectations has come almost entirely from the energy sector. Among this, Exxon Mobil and Chevron (CVX) together account for approximately 24% of the index’s earnings revisions, with earnings expectations for the two companies rising 44% and 67%, respectively, since February 27. Occidental Petroleum has seen its earnings expectations revised up by as much as 251%, while ConocoPhillips (COP), Valero Energy (VLO), and EOG Energy (EOG) have each contributed about 3% to 5% to earnings revisions. Analysts point out that this round of earnings revisions has a structural characteristic: the explosive growth in AI-driven semiconductor demand has propelled the technology sector upward, while rising energy prices have significantly improved the earnings outlook for oil and gas companies.
