Oil volatility puts energy stocks and AI power plays in focus

Oil-linked stocks are getting fresh attention as fighting around the Strait of Hormuz and Ukrainian strikes on Russian refineries keep energy prices volatile. For everyday investors, the link is direct: higher oil and fuel prices can lift earnings estimates for producers and refiners, while also feeding inflation fears that can weigh on the broader market.

CNBC’s Power Insider reported that recent energy headlines have shifted quickly, with Iranian military attacks on ships, including two strikes on U.A.E. oil tankers and one reported death, as well as strikes involving Kuwait. CNBC also reported that President Donald Trump’s proposed 20% “security fee” tied to Hormuz shipping was dropped soon after it emerged.

CNBC said a 20% charge on a fully loaded oil supertanker could have topped $30 million, making many cargoes uneconomic for shippers and oil companies.

How oil risk reaches stocks

The case for higher crude prices rests on several factors cited by CNBC: risk tied to Iran, falling global inventories, a lower U.S. Strategic Petroleum Reserve and still-solid economic growth. OPEC recently kept its global growth estimate at 3.2%, according to CNBC.

The case for lower prices points in a different direction. CNBC reported that global storage releases may keep supply available, while China’s oil demand has dropped. Ukraine’s drone strikes on Russian refineries add another twist: damaged refineries process less crude into usable fuels such as diesel, which can force more Russian crude onto the global market.

That mechanism can push refined products higher while adding crude supply. Refined products are fuels made from crude oil, including gasoline and diesel.

Oil is also showing up in rates. CNBC reported that the U.S. 10-year Treasury yield moved back above 4.6%, while some Federal Reserve officials have said rate hikes may be needed to fight inflation. Higher rates can pressure stock valuations because future profits are discounted at a steeper rate.

Deutsche Bank said a large stock-market selloff after an oil shock typically needs at least one of three conditions: a 50% to 100% oil price surge that lasts for months, a sharp central-bank shift toward tighter policy, or enough economic damage to push a weakening economy toward recession. Deutsche Bank said the current shock has not met those thresholds.

Refiners, oil majors and earnings

Seaport Securities strategist Jonathan Golub told CNBC’s Power Lunch that the overall stock market still looks inexpensive in part because profit estimates keep rising. He put the S&P 500’s forward price-to-earnings ratio, a valuation measure comparing stock prices with expected profits, at 19.5 times earnings.

Golub said energy stocks make up 3% of the S&P 500 but generate 5% of its earnings, and that energy company profits are expected to double. CNBC noted that ExxonMobil, Chevron and ConocoPhillips have significant exposure to higher oil prices, which has helped lift earnings expectations.

Refiners have also drawn attention. CNBC reported that Ukrainian attacks on Russian refineries are lifting prices for refined fuels such as diesel, helping U.S. refining stocks. PBF Energy has doubled this year, while Par Pacific and Delek are not far behind, according to CNBC. CNBC also cautioned that some of these stocks are trading at or above average Wall Street price targets.

Uranium and data-center power

Beyond oil, analysts are also watching nuclear and data-center power. Truist Securities analyst Christopher Souther initiated coverage of Cameco with a buy rating and a $129 price target, which CNBC said implied about 40% upside. Souther described Cameco as a high-quality uranium business with favorable long-term supply and demand positioning, according to CNBC.

CNBC also highlighted companies that began around bitcoin mining power and are shifting toward artificial-intelligence data centers, including TeraWulf, Hut 8, Cipher Digital and CleanSpark. These companies are not identical, but CNBC reported that they share exposure to demand for power from large data-center customers.

TeraWulf announced a 20-year deal with Anthropic valued at $19 billion or more, according to CNBC. CleanSpark signed a two-decade agreement with a large technology customer in Georgia, and Hut 8 announced a 15-year, $9.8 billion deal.

Morgan Stanley analyst Stephen Byrd remains positive on the group, CNBC reported. His $72 target for TeraWulf implies the stock could triple from recent levels, while his $48.50 target for Cipher Digital implies more than a double, according to CNBC.

One policy risk is already visible. CNBC reported that New York became the first state to ban new data centers for at least one year. TeraWulf CEO Paul Prager told CNBC the order should create clearer rules through the Public Service Commission and said the company’s Lake Mariner project is operational and fully permitted, while the moratorium does not change expectations for Lake Hawkeye.

This story draws on original reporting from CNBC.