Energy a Winner in an Otherwise Shaky Market — Evening Brief – 03.20.25
West Texas Intermediate (WTI) crude oil surged to a three-day high on Thursday, climbing 2% and nearing its peak price for the month, following the U.S. Treasury’s announcement of new sanctions targeting Iran’s oil export network.
The Treasury’s Office of Foreign Assets Control (OFAC) designated Shandong Shouguang Luqing Petrochemical, a Chinese “teapot” refinery, and its CEO for purchasing and processing hundreds of millions of dollars’ worth of Iranian crude. This marks the first time a Chinese refinery and its leadership have been directly sanctioned for such activities, signaling an escalation in U.S. efforts to disrupt Iran’s oil trade.
While the immediate impact on global supply remains uncertain, the sanctions underscore a broader U.S. strategy to tighten economic pressure on Iran, potentially unsettling oil markets already sensitive to geopolitical tensions.
Today’s oil spike is poised to further embolden energy investors who are already riding a wave of strong sector performance. Energy stocks have reclaimed their spot atop the S&P 500 leaderboard in 2025, surging nearly 8% year-to-date despite a broader market decline of almost 4%. This resurgence comes after two years of underperformance, with the sector trailing badly in 2024—gaining just 2% while the overall market, fueled by tech, soared over 20%. Now, with oil prices rebounding and inflation fears intensifying, energy has reemerged as a haven for traders seeking to hedge against rising price pressures.
The energy sector’s last full-year dominance of the S&P 500 came in 2022, when Russia’s invasion of Ukraine drove oil above $100 a barrel. Today’s geopolitical jolt adds fuel to the sector’s rally, amplifying its appeal as a value play. Energy remains one of the cheapest S&P 500 sectors, and with high-growth tech stocks stumbling, investors are pivoting toward it for both value and stability.
Wall Street’s sentiment is also turning. After a year of negative earnings revisions in 2024, energy is now seeing upgrades, per Barclays Plc, while other S&P 500 segments face downgrades. This confluence of factors—rising oil prices, inflation hedging demand, and a hunt for undervalued assets—positions energy investors to capitalize on today’s spike, reinforcing the sector’s standout performance in an otherwise shaky market.