The actions of American and European energy companies took a hit on Wednesday as a ceasefire in the Middle East conflict reduced the war premium integrated into oil prices due to fears of supply disruption through the Strait of Hormuz.
Oil prices dropped below $100 per barrel after U.S. President Donald Trump agreed on Tuesday to a two-week suspension of strikes on Iran, contingent on the immediate and safe reopening of the strait.
Analyst Achilleas Georgolopoulos noted that while the initial market reaction was significant, the sentiment will continue to be guided by headline risks. Any sign that the ceasefire is on thin ice could quickly reverse the risk appetite improvement seen today, with oil prices being the first to react.
Contracts for Brent crude reached their lowest level in over a month at $90.40, falling after record monthly gains in March due to supply disruptions related to the conflict.
The energy sector stocks, which had surged earlier in the year due to rising oil prices, were primarily responsible for the market declines. Companies like Exxon Mobil, Chevron, Occidental Petroleum, Devon Energy, Diamondback Energy, and ConocoPhillips all saw losses ranging from 5% to 7.5%.
Exporters of liquefied natural gas (LNG) faced significant impacts, with companies like Venture Global and Cheniere Energy experiencing notable declines.
This downturn followed a robust first quarter for the sector, with the S&P 500 Energy index climbing over 37%, making it the top-performing sector within the S&P 500 index.
Analyst Ashley Kelty mentioned that the pause in hostilities could give markets more time to assess the conflict’s impact and evaluate the damage to facilities and the time needed to increase production.
In Europe, major energy companies like TotalEnergies, Shell, BP, Eni, and Repsol saw their stocks drop between 4.6% to 7.7%. Equinor from Norway experienced an 8.7% decline, while Var Energi and Aker BP lost around 11.8% and 9.9%, respectively.
The European oil and gas sector saw a decline of 2.6%, marking its largest daily drop since April 2025. Despite this, the index remained over 30% higher in 2026.
On a positive note, airline stocks, including United Airlines, Delta Air Lines, and American Airlines, rose by over 7%, providing relief after facing pressure from fuel cost increases in recent weeks.
