The short-term rebound in oil prices is difficult to beat, and structurally weak energy stocks continue their weak trend

The Zhitong Finance App learned that recently, the conflict between Israel and Iran has led to a rebound in international oil prices, which have almost rebounded to the level before the “Liberation Day Tariff” was announced on April 2, yet energy stocks have not strengthened at the same time and are clearly lagging behind. This shows that the market still sees this conflict as a short-term disturbance, and has not wavered in its judgment that the oil market is “fundamentally flawed.”

Currently, the price of Brent crude oil, the international crude oil benchmark, is about 73.25 US dollars per barrel, which is only 2% lower than before the announcement of the tariff news on April 2. On the same day, US President Trump announced the imposition of “equal tariffs” on foreign countries, which has led to a sharp drop in oil prices. However, on the other hand, the major US energy stock ETF, the Energy Select Industry SPDR Fund (XLE.US), has declined 7% since April 2.

The biggest decline was in oil service stocks, which are closely related to oil field operations. Halliburton (HAL.US), the leading US oil service company, has declined 10% since that day. However, the rebound in oil prices has not boosted these stocks. The reason behind this is that the market believes that this round of price shocks is “unsustainable.”

Roth Partners analyst Leo Mariani said, “Investors don't believe this rebound will hold up.”

Currently, although both Israel and Iran have attacked some energy facilities, they have not caused damage to critical infrastructure. According to the latest news, Iran intends to push for a cease-fire and begin negotiations, so that the situation may ease within a few days or weeks rather than falling into a long-term conflict.

The expectation of such a “short-term conflict” is also reflected in the oil price futures curve. The price of crude oil futures recently delivered is higher than that of forward contracts, indicating that the market does not think that high oil prices will last too long. For example, the price of Brent crude oil futures for April 2026 delivery was $68.88, which is more than $4 lower than the August 2025 contract.

For energy stocks, the greater challenge is that most analysts predict that there will be an oversupply of crude oil in the second half of this year, which will depress oil prices. In response to this prospect, oil companies have begun to reduce the number of rigs. According to Baker Hughes' drilling platform data, the number of active oil wells in the US has declined by 10% in the past year.

“I don't think companies that have already left their rigs will restart construction anytime soon,” Mariani said. Conversely, some producers may stay on hold and wait and see where prices go.