Arctic Sector Report: Energy - The bull case has strengthened

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Arctic Sector Report: Energy - The bull case has strengthened

Energy E&P

E&P | Sector Report | 12 May 2026 | 01:50

The bull case has strengthened Key figures & indices

We upgrade the E&P sector as the bull case has strengthened in our view. First, despite

multiple diplomatic efforts, a deal that would reopen the Strait of Hormuz has yet to

materialize, and the gap between the parties appears wide. We assess that Iran is

deliberately pursuing a strategy of delay against the U.S., betting that time works in its

favour – suggesting that the current status quo could persist longer than previously

anticipated. Second, E&P equities have undergone a meaningful correction from their Q2

peaks, improving entry points. The same applies to oil and gas prices, which currently

appear modest relative to tightening physical balances and increasingly unsustainable

inventory draws. Third, with the Strait effectively closed for ten weeks (approaching ~1bn

barrels of inventory drawdowns that will ultimately need to be replenished), the “fair”

downside in E&P stocks in the event of a deal is likely to progressively diminish over

time, as the realities of stock rebuilding become more apparent. Finally, even if a deal

is reached, key uncertainties remain around implementation, durability, and the risk of

renewed disruptions. In our view, the peak in oil prices now appears more likely to be

pushed into Q3, leaving risk/reward skewed to the upside on a tactical horizon.

Oil market: Price risks increasingly skewed to the upside as crisis drags on

While crude prices paused in April following the all-time high jump in March, we question the

market’s newfound optimism for a quick and durable solution as the diplomatic process appears

to have stalled.