My super contrarian energy call in 2025 is finally paying off!
Forget bragging, though. Today I’m sharing why even as an energy bull I’m not buying the $100+ oil price predictions (or the contrarian call shared by Eddie Ghabour at the end of this email).
What’s The Big Skinny? Oil prices and energy stocks were artificially suppressed for months and overdue for a revaluation. So what we’re seeing isn’t a supply crisis – it’s a market that got caught leaning the wrong way.
.1 Headline.
“Oil Prices Surge As Analysts Say Iran Conflict ‘May Be Different’ From Previous Flare-Up”
Every time missiles fly over the Middle East, the same reflex kicks in – traders panic, headlines scream about $100 oil, and columnists invoke the 1973 Arab oil embargo.
Right on cue, I caught Yahoo! Finance invoking Wall Street’s version of saying Beetlejuice three times, courtesy of Mizuho equity analyst Nitin Kumar.
“Recent conflicts have generated a more muted response in oil prices, refining margins, and energy equities. But this time may be different.”
Silly Rabbit! It’s never different.
If this conflict were truly a sustained threat to global oil supply, we’d already be well past $100 a barrel. And we’re not even close.
Yes, Brent prices initially surged 6.7% to $77.74 and WTI jumped 6.3% to $71.23 - some of the largest single-day moves in four years. But the scary fast moves aren’t really that frightening when we zoom out.
Oil’s still sub-$100, which puts us in the historically contained, not catastrophic category.
Jinjoo Lee over at The Wall Street Journal begs to differ, arguing oil markets “can’t shrug off” this conflict. Especially if there’s a “prolonged disruption to the flow of oil tankers through in the Strait of Hormuz.”
The implied risk if she’s right is singular - recession 😱.
.1 Chart.
I’ll be the first to admit that the data’s undeniable – surging oil prices lead to economic downturns.
So who’s viewpoint should you believe? Neither!
Believe the market instead. It’s already pricing in the factors that promise to keep a lid on prices, and in turn, keep a recession at bay, including:
OPEC boosting: Saudi Arabia, UAE, and Kuwait have signaled flexibility to boost output immediately. OPEC’s instinct in these moments isn’t to cash in on chaos – it’s to prevent the demand destruction that reliably follows sky-high prices. Or as Semafor noted, “A global energy transition that accelerates because prices stay high for too long is even worse” for producers than short-term gains.
President Trump’s pulling every lever: The administration is considering extraordinary measures to keep barrels flowing – including Navy-backed insurance for tankers transiting the Strait of Hormuz and accelerating domestic drilling permits.
The U.S. is different this time (yes, I said it): Since 1973 America has transformed from an energy hostage into the world’s largest oil producer. We’re a net exporter now – not a supplicant begging OPEC for relief.
Here’s another data set that should put any Strait of Hormuz panic to bed permanently:
The U.S. receives just 2.5% of crude oil flows through the strait.
China receives 37.7%, while Asian nations collectively receive 89.2%.
In other words, a Hormuz disruption is not America’s problem. It’s mostly Asia’s… and Iran’s.
After all, a prolonged shutdown is self-defeating, since Iran depends on those same export routes to fund their war effort.
For argument’s sake, let’s do some maths…
Bloomberg Economics estimates a complete halt in Iranian exports would push prices up roughly 20%, while a Strait of Hormuz closure could target $108.
That’s the worst case – and it still barely clears the $100 danger zone.
.1 Investment Insight.
Keep Buying XLE
Here’s where this gets personal – and profitable…
I’ve been banging the table since mid–2025 that oil and energy stocks were undervalued, unloved, and underweighted.
The energy sector had fallen to a historically low weighting in the S&P 500 (sub–3%), even though the sector was the cheapest in the market on both an absolute and relative basis at ~15 times earnings.
Fast-forward to today and the energy sector flipped from one of 2025’s worst performers to 2026’s top performer.
The Energy Select Sector SPDR Fund $XLE ( ▼ 0.58% ) is up nearly 25% year-to-date. Meanwhile, the State Street Technology Select Sector SPDR ETF $XLK ( ▲ 1.7% ) is barely eking out a 2.5% gain.
Let that sink in. The “boring” sector that Wall Street left for dead is lapping the AI darlings by a factor of 10x over the last two months.
The Big Skinny: “This time is different” is almost always wrong – and the oil market is proving it again in real time. Prices are up but contained, supply buffers are kicking in from multiple directions, and the U.S. energy dominance story is the structural force that the panic merchants keep ignoring.
.Before You Run….
Two AI stocks picks: From today’s appearance on Varney & Co (Fox Business)
ICYMI: Replay of The Big Skinny Live here
The most contrarian pick for 2026: Even I’m not buying yet (Eddie Ghabour)
For entertainment/educational purposes only. Not financial, legal, or tax advice; not a recommendation or solicitation. Terms & Conditions: TheBigSkinny.com.
