11 energy stocks to navigate the worst oil supply shock in history

The global oil market has swung from a projected surplus to a severe deficit of nearly 1.8 million barrels per day for 2026, the International Energy Agency reported, as the war in Iran upends Middle East production and creates what one analyst calls the biggest energy supply shock ever.

"The law of supply and demand is threatening to take prices higher…possibly much higher," Bob Yawger, director of energy futures at Mizuho, told Newsweek. "There is no easy way out."

The IEA's latest report shows global oil supply will fall by 3.9 million barrels per day (bpd) in 2026 due to the conflict, a sharp reversal from its December forecast of a 4 million bpd surplus. The ongoing closure of the Strait of Hormuz has shut in more than 14 million bpd of oil, leading to a 246 million barrel drawdown in global inventories in just March and April.

With inventories draining at a record pace and a resolution to the conflict uncertain, a Barron's roundtable of energy experts identified 11 stocks, including producers like Devon Energy and service firms like Baker Hughes, that are positioned to weather the storm and benefit from a sustained period of higher energy prices.

A Supply Deficit Through 2026

The primary driver of the market's reversal is the disruption to production and transit in the Middle East. The IEA now assumes the Strait of Hormuz, through which 20 percent of the world's oil typically passes, will remain effectively closed through the end of May. The agency estimates that cumulative supply losses already exceed 1 billion barrels.

The U.S. Energy Information Administration (EIA) echoed the sentiment, revising its own forecasts to reflect longer disruptions. The EIA now projects that 10.8 million bpd of output will be shut in this month, up from a previous estimate of 9.1 million bpd, as regional storage tanks reach capacity. The IEA forecasts the market will remain "severely undersupplied" through the third quarter of 2026, with the second-quarter deficit reaching as high as 6 million bpd.

Inventories Nearing Critical Levels

The supply shock is forcing the world to draw down oil inventories at an unprecedented rate. In the U.S., the situation is becoming particularly acute ahead of the peak summer driving season. Total oil and fuel inventories fell by a combined 49 million barrels in the three weeks to May 8, according to the EIA.

Jeff Currie, a senior advisor at The Carlyle Group, warned that U.S. oil storage could run out "somewhere in that July 4 time period, if not sooner." While crude oil stocks remain just below the five-year average, product storage is "falling fast," with distillate inventories sinking to a 20-year low of around 102 million barrels. The national average price for a gallon of regular unleaded has already crossed $4.50, and some analysts see it rising toward $7 per gallon if the conflict persists.

Even if a diplomatic resolution is found, experts believe the market will take months to normalize. The IEA's base case assumes a gradual resumption of traffic through the strait in the third quarter, but it would take "three-plus months" for international oil flows to recover, according to Currie. This prolonged disruption underpins the investment thesis for the stocks identified by the Barron's roundtable, as energy producers and service companies are set to benefit from an extended period of elevated prices.

This article is for informational purposes only and does not constitute investment advice.